Buy HCL Technologies; target of Rs 990: Dolat Capital Market

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26 Aug, 2025 12:21

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Dolat Capital Market's research report on HCL Technologies

HCLT reported 4.5% QoQ CC growth (DE: 3.8%) led by strong growth across business segments. OPM improved by 108bps to 21.6% (DE 20.7%) helped by operating efficiency (157bps) that funded investment in P&P 32bps and FX impact 24bps. Pat up 7.5% QoQ at Rs31.4bn. FCF generation took significant leap (swing of over 1bn$ YoY basis) given strong earnings growth, low Capex/acquisition investments and improved DSO (by 11 days YoY). FCF/NI now stands at 146% on TTM basis given increased non-cash charges in P&L. As a result, it has doubled up its quarterly dividend payouts to Rs. 4 per share. HCL retained revenue CQGR at 1.5%-2.5% for Q3/Q4 but has upped the OPM band guidance by 100bps to 20% to 21%. Transformational deal wins were 15, taking the booking TCV up 35% QoQ (flattish on YoY Basis). Growth indicators are strong with pipeline (all-time high), sustained traction in P&P and revival in ERS business due to cloud-led growth.

Outlook

Given result beat, confident outlook/commentary, strong lead indicators, improved FCF generation profile we retain HCLT as our Top pick with Buy rating and TP of Rs990 valued at 18x PER on FY23E EPS.

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