HCL Technologies Ltd. share price target

HCLT OCF generation was strong in this quarter (US$2.3bn vs US$1.3bn avg) post making the pending payment of IBM ($812mn), Net cash is US$ 1,330mn. HCLT generates ~US$1.7bn over the next 2-3 years & with limited capex &...

HDFCB: Strong enough to weather the storm. HCLT: Upbeat margin outlook

HCL Tech a reported steady set of results in Q1 FY21. Revenue for the period of Q1 FY21 stood at Rs. 17,841 cr decline by 4% QoQ much in line with the expectations. Operating margin reported a strong growth of 250bps and stood at 25.6%. Net income declined by 7.3% QoQ and stood at Rs. 2925 cr.

HCL Technologies' (HCLT) Q1FY21 revenue decline of 7.2% QoQ in CC was in-line with our forecast of a decline of 7.8%. However, HCLT was able to limit the decline in EBIT margin to 40bps QoQ to 20.5% (vs. our forecast of 19%) through its cost saving initiatives. EPS of Rs10.8, -7.3%/+31.6% QoQ/YoY was also beat to our forecast. HCLT has reinstated its FY21 guidance with revenue CQGR of 1.5% to 2.5% in CC, implying -2.3% to -0.8% YoY decline for FY21, and EBIT margin of 19.5% to 20.5%. We largely maintain our FY21/22 revenue forecast and increase EBIT margin forecast by 100bps/25bps to 19.8%/20.2%. We also increase FY21/22E EPS by 5.9%/6.6%. We...

18 July 2020 HCL Technologies (HCLT) reported EBITDA margin expansion (+20bp QoQ) despite the COVID-19 disruption, which is impressive. Notably, it had reported margin expansion even in 4QFY20, when most other large companies had witnessed contraction. A decent increase in net new deal wins and a robust deal pipeline (+40% QoQ) comfort us. HCLT surprised us by reinstating revenue growth (+1.52.5% CQGR, CC) and EBIT margin guidance (19.520.5%). Maintain HCLT to better navigate the current crisis and emerge stronger on the back of an expected increase in enterprise demand for Digital Services. HCLT reported revenue (CC) / EBIT / PAT growth of 1%/30%/32% YoY v/s our estimate of 1%/17%/19% YoY. Revenue decline was in-line with estimates. As expected, Engineering Services (-9% QoQ, CC) was the biggest overhang on revenue this quarter. While the IT & Business Services segment declined ~8% QoQ (CC), the Products & Platforms business remained resilient (-2% QoQ, CC).

HCL Tech (HCLT) reported a sharp 7.2% QoQ CC topline decline but resilient EBIT margins of 20.5% in Q1FY21.

HCL Tech reported largely in-line revenue performance, while EBIT margin and net profit beat our estimates. Constant currency (CC) revenue declined 7.2% q-o-q, broadly in-line with our estimates, owing to supply-side constraints due to COVID-19 (1/3rd of total revenue impact from COVID) and reduction of revenue from offshoring of a large deal. IT and business services (down 7.8% q-o-q CC) and engineering R&D; (down 9% q-o-q CC) were the key drags on revenues owing to exposure to troubled verticals and asset heavy industries. EBIT margin contracted 36bps q-o-q to 20.5%, beating our estimates, owing to increased amortisation due to...

We recommend a BUY on HCL Tech with a Target Price of Rs 600, an upside of ~7% from CMP of Rs. 562 and Stop Loss Rs 530.

HCL offers its services and products through three business units - IT and Business Services (ITBS), Engineering and R&D; Services (ERS) and Products & Platforms (P&P;). ITBS enables global enterprises to transform their businesses through offerings in areas of Applications, Infrastructure, Digital Process Operations and next generational digital transformation solutions.ERS offers engineering services and solutions in all aspects of product development and platform engineering. Under P&P;, HCL provides modernized software products to global clients for their technology and industry-specific requirements...

Revenue up 0.8% in CC thanks to 7% growth in Mode 2 services, above estimates Consolidated revenue for the quarter in rupee terms was up by 2%QoQ to Rs 18587 crore (from Rs 18135 crore in quarter ended Dec 2019). Higher revenue for the quarter was largely due to 3% growth in revenue of ITBS (IT & business services) as well as 2% growth in revenue of P&P; (Products & Platforms). While the revenue of ITBS stood higher at Rs 13130 crore that of P&P; stood at Rs 2417 crore for the quarter. Meanwhile the revenue of Engineering and R&D; was flat...