HCL Technologies stock falls 7% post Q3 earnings: Should you buy, sell or hold?

HCL Technologies share fell over 6% today after the IT firm reported a 13.6% year-on-year fall in consolidated net profit for the quarter ended December 31, 2021. The large cap stock touched an intraday low of Rs 1244, down 6.99% on BSE.

The stock opened with a loss of 4.6% at Rs 1,276. The stock trades higher than 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages. HCL Technologies stock has gained 27.28% in one year and fallen  4.48% since the beginning of this year.

In a month, the stock has gained 7.49%. Total 2.51 lakh shares of the firm changed hands amounting to a  turnover of Rs 31.57 crore on BSE. Market cap of the firm fell to Rs 3.42 lakh crore.

HCL Technologies posted a net profit at Rs 3,442 crore in Q3 of the current fiscal against a net profit of Rs 3,969 crore in the year-ago period.

Profit after tax (PAT) for Q3FY21 was higher by $59.4 million (Rs 438 crore) due to reversal of a prior years' tax provision due to change in the method of calculating a tax deduction, the firm said.

Excluding this, PAT for Q3 FY22 slipped 4.7% YoY in dollar terms (down 2.9% YoY in rupee terms). Revenue rose 15.7% YoY to Rs 22,331 crore in Q3 against Rs 19,302 crore in the same quarter last fiscal. Sequentially, revenue climbed 8.1% and net profit rose 5.4%.The EBITDA margin stood at 23.4% and the EBIT margin at 19.0%, the company said.

Here's a look at what brokerages said post the IT company's Q3 earnings .

YES Securities has maintained its buy call on the stock.

"Overall, strong operating performance led by robust growth in ER&D services and product and platform business. The services business constituting 87% of revenue maintained strong growth momentum (up 5.3% QoQ). Deal booking remained strong at $2,145mn, up 64% YoY, proving strong growth visibility. The stock trades at an attractive valuation at PE of 19.3x on FY24E EPS. We maintain BUY Rating on the stock with revised target price of Rs 1,556," said YES Securities.

Motilal Oswal has maintained its buy call on the stock.

"On a combined basis, the firm should deliver an FY22-24E USD revenue growth of 15.1%, with growth almost doubling from FY20-22E levels. With profitability improving by FY24E (up 100bp v/s FY22E levels), the corresponding PAT CAGR will be 17.7%. USD revenue/INR EBIT/INR PAT grew 13.5%/0.1%/4.5% YoY in 9MFY22. We lower our FY22E EPS estimate by 1% due to a margin hit, but raise the same for FY23 by 2% due to growth acceleration. We maintain our Buy rating and marginally tweak our TP to INR1,690/share (25x FY24E EPS)," the financial services firm said.

ICICI Securities in a report said, "HCLT reported weak numbers on the margins front. Revenue increased 7.6% QoQ in constant currency terms. IT services, ER&D revenues grew 4.7%, 8.0%, respectively, QoQ in CC terms. EBIT margin of services business dipped 190 bps QoQ. The company is looking to hire 20,000 freshers in FY22.

HCLT's share price has grown by 3.5 times over the past five years (from  Rs 382 in January 2017 to Rs 1,330 levels in January 2022). We downgrade the stock from BUY to HOLD rating with a target price of Rs 1430."