HCL Technologies Ltd. share price target

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

HCLT disappointed with overall miss. The disappointment was on account of a sharp ramp-down in the technology and telecom segments, where revenues declined significantly. Despite a weak Q1, HCLT has retained its FY24 revenue and EBITM guidance of 6-8% and 18-19%. This implies CQGR of 3.1-4.4% over Q2-Q4 — a steep ask, given the current environment.

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.

HCL Tech (HCLT) reported its Q4FY23 revenues at US$3,235mn, down 0.3% QoQ in USD and down 1.2% QoQ in CC terms (better than our estimate of -1.9% and consensus at -1.5%). Revenues in CC terms were up 10.5% YoY in Q4FY23.

We recommend a BUY rating on the stock and assign a 17x P/E multiple to its FY25E earnings of Rs 73.10/share to arrive at a TP of Rs 1,245/share, implying an upside of 20% from the CMP.