HCL Technologies Ltd. share price target

We have cut our estimates by 7%/4% for FY22/23E on account of 1) low revenue acceleration as compared to peers, 2) Cut in margin estimates (100bps for both years), 3) Higher ETR in FY22/23. Due to inability to maintain profitability post COVID we have reduced our target PE to 18X from 20X....

HCL Technologies' (HCLT) Q4FY21 revenue growth of 2.5% QoQ in CC was in-line with our forecast of +2.9%. However, EBIT margin of 16.6%, -630bps QoQ (20.3% Ex-one time pay out to employees) was a big miss to our forecast of 19.2%. As a result, EPS of Rs8.8, -40%/24% QoQ/YoY was also a big miss. For FY22, HCLT has guided for a double-digit revenue growth in CC, in-line with our expectation. However, EBIT margin guidance of 19% to 21% (vs. 21.3% ex-one time payout to employees for FY21) is lower than our expectation. We factor EBIT margin miss in Q4FY21 & FY22 guidance, higher ETR and cut our FY22/23...

Revenue trajectory to improve in coming years The company plans to tap the US$300 billion cloud opportunity by 2023; considering the company's expertise in Infrastructure Management Services (IMS) & app modernisation and focus on integrated deals. The company expects healthy double digit growth in revenues in FY22E mainly led by improved growth in IT & business services and ER&D; (the company believes it has bottomed out and will see growth from here on). In terms of products & platforms HCL expects 75% of products to grow at a healthy pace but the...

HCLT delivered in line revenue growth (2.5% QoQ CC) in 4QFY21, led by strong traction in IT Services (+4.4%), but partially offset by muted ER&D; (+0.7%) and a fall in Products and Platforms (-4.9%) due to seasonality and client-specific weakness. EBIT margin (adjusted for one-time bonus impact of 370bp) fell 250bp QoQ to 20.4% on wage hike (60bp), seasonality in Products and Platforms (70bp), higher fresher hiring (60bp), forex (20bp), and impairment charges (60bp). The management guided at double-digit USD revenue growth and 19-21% as the EBIT margin band for FY22....

HCLT remains one the most attractive stocks in our coverage, trading at 15x FY23E P/E (38%/26% discount to TCS/Infosys), despite delivering 20% earnings growth in FY21 YTD. We expect this discount to narrow as it benefits from increasing Cloud spend, given its large exposure to IT infrastructure. It can potentially re-rate if it continues to deliver growth in the Software Product business, which remains a key overhang on the stock price, despite outperforming expectations over the last two quarters....

HCL Technologies Limited provides software development business process outsourcing, information technology and infrastructure services. The company is spread across 49 countries with 150,000+ employees and its...

HCL Technologies' (HCLT) Q3FY21 revenue growth of 3.5% QoQ in CC was slightly higher than our forecast of +2.9%. However, EBIT margin saw a strong improvement of 130bps to 22.9% and was a beat to our forecast. EPS of Rs14.7, 25.7%/+31% QoQ/YoY (aided by lower ETR) was even bigger beat to our forecast. Q3FY21 saw 13 transformational deals and HCLT is confident of improving the deal-win momentum going forward. It has increased its Q4FY21 revenue guidance to 2%-3% QoQ vs. 1.5%-2.5% earlier and FY21 EBIT margin guidance to 21%-21.5% vs. 20%-21% earlier. We factor the Q3FY21 beat, guidance and increase our FY21/22/23 revenue (US$)...

We recommend BUY and assign 16x P/E multiple to its FY23E earnings of Rs. 59.8 per share which gives a TP of Rs. 1,136 per share, an upside of 15%.

a growth of 1%QoQ and -5%YoY. However, the Mode 2 services [(services that helps enterprise take the next digital leap) (accounts for 22.7% of HCL's revenue)] registered strong growth of 13%QoQ and 28%YoY. Similarly the Mode 3 services [Innovative IP's to help enterprises to be future ready) (or 16.3% of revenue)] registered a growth of 8%QoQ and 6%YoY....