Hold HCL Technologies; target of Rs 1119: KRChoksey

KRChoksey's research report on HCL Technologies

HCL Tech witnessed strong revenue growth of 13.1% YoY CC which was led by their Services business which grew 15.4% YoY CC; and strong revenue growth of 5.0% QoQ CC which was led by HCL Software. Constant Currency Revenue was up 5.0% QoQ & up 13.1% YoY. Whereas INR Revenue stood at ₹ 2,670 Mn, up 19.6% YoY and up 8.2% sequentially. It recorded USD Revenue of US$ 3,244 Mn, up 5.3% QoQ & up 9.0% YoY. Services Revenue (ITBS and ERS) was up 2.2% QoQ & up 15.4% YoY in Constant Currency. Mode-2 Revenue up 27.0% YoY in Constant Currency. Profitability was at all-time high with EBIT at ₹ 523 Mn (up 22.8% YoY) and PAT at ₹ 409 Mn (up 19% YoY). EBIT Margin were at 19.6%, up 165 bps QoQ and Net Margin at 15.3%, up 117 bps QoQ.

Outlook

The company is currently trading at a PE multiple of 21. We have maintained the target price to INR 1,119 with a P/E multiple of 19.9x to the FY24 estimated EPS of INR 56, an upside of 4.3% over the CMP. Accordingly, we maintain our rating to “HOLD” to the stock.