Hold HCL Technologies; target of Rs 930: ICICI Direct

ICICI Direct recommended hold rating on HCL Technologies with a target price of Rs 930 in its research report dated October 26, 2017.

October 27, 2017 / 17:38 IST

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ICICI Direct's research report on HCL Technologies

HCL Tech reported its Q2FY18 numbers with the topline below our expectations while the EBIT margin was in line with our estimates. US$ revenues grew 2.3% QoQ to $1,928 million, below our 4% growth and $1,960 million estimate. Revenues in constant currency grew 0.9% QoQ, which is largely lower than its peers Revenues in rupees grew 2.3% QoQ to | 12,434 crore, below our 3.7% QoQ growth and | 12,595 crore estimate At 19.7%, EBIT margins declined 40 bps QoQ and were in line with our 19.7% estimate PAT of | 2,188 crore was above our | 2,153 crore estimate led by higher forex gain (up 34.6% QoQ) HCL Tech announced a dividend of | 2/share for a 59th consecutive quarter

Outlook

Growth trajectory slowing down despite inorganic route; retain HOLD… HCL Tech’s lower end guidance for revenues implies CQGR of 2.5%, which appears to be challenging in a seasonally weak period. Secondly, IMS (38.5% of revenues) growth trajectory is slowing down (reported flattish constant currency growth in Q2FY18). Hence, we have slightly tuned our EPS estimates and expect HCL Tech to report revenue, PAT CAGR of 9.4%, 4.6%, respectively, in FY17-19E. We maintain our HOLD rating on HCL Tech with a target price of | 930 (~14x FY19 EPS).For all recommendations report, click here

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