Buy HCL Technologies; target of Rs 1050: ICICI Direct

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26 Aug, 2025 12:21

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ICICIdirect.com's report on HCL Technologies• HCL Tech reported soft Q1FY16 quarterly earnings as growth was inline with our estimates while adjusted EBIT margins were above• US$ revenues grew 0.5% QoQ to $1,544.5 million (0.8%, $1,550 million estimate) while those in constant currency grew 1.2% QoQ• At 20.5%, adjusted EBIT margins improved 35 QoQ and were above our 70 bps decline and 19.5% estimate. However, including one-time charge, EBIT margins declined ~80 bps QoQ to 19.4%• Adjusted PAT of Rs 1,726 crore was in line with our Rs 1,705 crore estimateOutlook and valuationHCL Tech reported soft Q1FY16 quarterly earnings. Dollar revenue growth was in line with our estimates while adjusted EBIT margins were better. Growth in constant currency was driven by the Europe; business, engineering services, and lifesciences, financial services and public services verticals. Though deal signings continue to be healthy (>$1 billion) spread across verticals and geographies, execution continues to be challenge. We expect HCLT to report revenue, PAT CAGR of 14%, 12% (15%, 13% earlier) in FY15-17E with average 21.8% margins in FY15-17E compared to 24%, 41% in FY10-15, respectively, with 18.8% margins led by order book conversion and steady execution. Estimate revision leads to a change in target price. We now value the stock at 16.5x FY17E EPS of Rs 64 (17x, Rs 65 earlier) to arrive at a revised target price of Rs 1,050 (Rs 1,100 earlier). Lower multiple is to account for moderating growth and margin profile. Buy the stock, says ICICIdirect.com research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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