ICICI Direct's research report on HCL Technologies
HCL Tech reported a strong margin beat mainly on account of IBM products consolidation and SG&A optimisation. For FY20E, the company has raised its revenue guidance to 15-17% (from 14-16%) in constant currency. Of this, ~10-11% YoY growth would be organic while another ~5-6% growth would be attributed to inorganic. It has maintained its EBIT margin guidance of 18.5-19.5%. The board has recommended a bonus issue of 1:1.
HCL Tech reported a healthy quarter from the perspective of margin expansion, deal signings and organic growth guidance. However, taking into consideration the company’s quality of revenue growth, acquisition led strategy and lower dividend yield in near term (owing to recent IBM deal), we maintain our HOLD rating with a revised target price of Rs 1200/share (~14x FY21E EPS).
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