HCL Technologies Ltd. share price target

Global uncertainties leading to delayed spending decisions pose a challenging environment to HCL Tech and will impact its performance in the near term. Moreover, supply-side constraints will take some more time to ease off. Hence, we recommend a HOLD rating on the stock.

HCLT has reported weaker-than-expected revenue growth of 1% QoQ CC (vs I-SEC estimate of 1.9%) in Q2FY24 due to weakness in products and platform business (-4% QoQ CC). Revenue growth revived in services business with 0.9% QoQ growth in IT services and 5% (1.6% organic) QoQ CC growth in ER&D vs a decline in Q1FY24 (exhibit 4).

During the quarter, HCL tech reported revenue growth of 12.07% on a YoY basis to INR 2,62,960 mn and decline by 1.17% on a sequential basis from INR 2,66,060 mn. USD revenue stood at $3200 mn in Q1FY24, registering a growth of 5.79% on a YoY basis and decline by 1.17% on a QoQ basis from $ 3235 mn.

Q1 revenue missed estimates largely due to a slowdown in ER&D services and the telecom & media vertical

HCL Tech (HCLT) has reported Q1FY24 revenue at US$3,200mn, down -1.1% QoQ in US$ and down 1.3% QoQ in CC terms below our/consensus estimate of 0%/0.8% QoQ CC growth. Softness in revenue growth was led by decline in ER&D (16% of revenue) by 5.2% QoQ CC, in IT and business services (75% of revenue) by 0.1% QoQ CC and in software products and platforms by 3.1% QoQ CC.