Prabhudas Lilladher's research report on HCL Technologies
HCLT reported largely in-line revenue of USD 3025 mn, +2.7% QoQ CC (PLe: 2.9%, Cons: 2.4%), +1.1% QoQ USD (PLe: 1%, Cons: 0.8%). Growth was led by Products (5.1% QoQ CC), followed by ER&D (3.7% QoQ CC). IT services growth was muted at 2% QoQ CC, as productivity benefits to be provided to clients kicked-in. EBIT margin declined by 100bps QoQ to 17% led by 180bps QoQ decline in IT services margin, due to higher talent costs amidst elevated levels and deal transition costs. Management has retained its margin guidance of 18-20% for FY23, but given headwinds from wage hikes spread across Q2 and Q3, we model EBIT margin at 17.5%/18% for FY23/24. We cut EPS estimates by 5%/2.6% for FY23/24 due to cut in margin estimates.
Outlook
We continue to value HCLT on 17x FY24 EPS to arrive at TP of Rs. 982 (earlier: Rs. 1007). HCLT is currently trading at 19x/16x on FY23/24E EPS of INR 49.8/57.7 respectively with Revenue/EPS CAGR of 9.3%/7.6% over FY22-24E. Maintain ‘HOLD’.
More Info
At 15:02 hrs HCL Technologies was quoting at Rs 916.40, down Rs 11.65, or 1.26 percent.
It has touched an intraday high of Rs 931.00 and an intraday low of Rs 905.20.
It was trading with volumes of 358,905 shares, compared to its thirty day average of 125,940 shares, an increase of 184.98 percent.
In the previous trading session, the share closed down 1.63 percent or Rs 15.35 at Rs 928.05.
The share touched its 52-week high Rs 1,377.00 and 52-week low Rs 925.00 on 24 September, 2021 and 12 July, 2022, respectively.
Currently, it is trading 33.45 percent below its 52-week high and 0.93 percent above its 52-week low.
Market capitalisation stands at Rs 248,680.27 crore.
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