ICICI Securities research report on HCL Technologies
HCL Technologies (HCLT) has reported in-line growth and margin for Q1FY25. IT and business services declined 1.8% QoQ USD, ER&D services declined 3.7% QoQ and products and platforms fell 0.9% QoQ. It maintains FY25 guidance of 3-5% revenue growth and 18-19% EBIT margin, which is already built in the price and we see limited positive triggers for HCLT in FY25. With Q1 print, HCLT needs 0.8-2.2% CQGR for the remaining three quarters. HCLT faces several headwinds in FY25 including: 1) ASAP acquisition integration, 2) State Street divestment- 80-90bps impact on revenue growth to fall in Q2 and 3) slow growth in ER&D segment. Factoring this in, we revise FY26/27E EPS by <1%.
Outlook
We value HCLT on SoTP basis – services (IT and ER&D) at 22x and products at 18x on FY26E EPS and maintain our TP at INR 1,455. Retain REDUCE on soft H1FY25.
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