Hold HCL Technologies; target of Rs 924: KR Choksey

Revenue in dollar terms grew by 6.5% QoQ to $1,690.7 mn versus our expectation of $1,675.6 mn.  Growth in Q1 FY17 was robust with Europe outperforming at 16.9% q-o-q growth in cc terms while N. America’s growth figure at 2% q-o-q and ROW growth remained flattish. Vertical-wise, Retail & CPG, Manufacturing and Public Services led the pack with a growth of 14.5%, 12% and 11.8% q-o-q in constant currency terms. HCL Tech delivered a strong message through it’s FY17 revenue growth guidance of 12% - 14% in cc terms and operating margin guidance of 19.5% to 20%.

We believe that the company is on the right path and has finally struck the right mix of strategies and execution capabilities with its acquisitions and organic developments after a long gestation period. However, the company still suffers from pricing pressure, in line with the industry-wide phenomena. We are highly optimistic about the company’s growth drivers, namely Next Gen ITO operations, DryIce automation program apart from focus on automation to sustain and improve its own margins.  Taking the same, we recommend “HOLD” on the stock with a price target of Rs.924 by assigning multiple of 14 times to its FY18E EPS of Rs. 66. 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.