HCL Tech climbs 4% as IT major revises upward its FY23 revenue guidance

Shares of HCL Technologies (HCL Tech) nearly 4 per cent in Thursday's trade, after the IT major increased it FY23 revenue guidance in constant currency (CC) terms and delivered a better-than-expected September quarter results .

HCL Tech has guided for a Service segment CC revenue growth of 16–17 per cent YoY in FY23. Overall, it revised upward its FY23 CC revenue guidance to 13.5–14.5 per cent from 12-14 per cent. EBIT margin guidance was revised to 18–19 per cent from HCLT revised from 18-20 per cent earlier.

"HCL Tech delivered a strong revenue growth of 3.8 per cent QoQ CC, 100 basis points above our estimates, led by IT services & ER&D verticals. Overall services grew 5.3 per cent in CC terms and it reported robust new deal TCV of $2.4 billion. The company increased its revenue guidance to 13.5-14.5 per cent in CC terms from 12-14 per cent earlier, which was a surprise, given the weakening macro environment," said Motilal Oswal Securities

TCV stands for total contract value. ER&D stands for engineering and research and development.

By 9.22 am, the IT scrip had hit a high of Rs 987.75 on BSE, up 3.79 per cent.\

Read More: Infosys gains ahead of share buyback meet, Q2 results. Here's what analysts say

Mitul Shah, Head of Research at Reliance Securities said HCL Tech's Q2 margin was above his expectations.

"Services business revenue (89.8 per cent of top line) grew 5.3 per cent QoQ and 18.9 per cent YoY in constant currency, which we consider is healthy. We expect HCL Tech to keep reporting healthy revenue, driven by consistent transformation deal wins, increasing focus on ER&D services and rising share of Mode 2 business. At present, we have HOLD recommendation on the stock with a 1-year target price of Rs 1,000. Earning upgrade and target price revision is on card," Shah said.

The IT major on Wednesday said its consolidated net profit for September quarter rose 7.05 per cent year-on-year (YoY) to Rs 3,489 crore from Rs 3,259 crore in the corresponding quarter last year.

The Noida-based company reported 19.5 per cent YoY jump in sales at Rs 24,686 crore. Dollar revenue for the quarter stood at $3,082 million, up 1.9 per cent QoQ). Revenue growth in constant currency (CC) terms came in at at 3.8 per cent QoQ.

The Noida-based firm said it won 11 large deals during the quarter, including eight in Services and three in Products segments. Overall, total contract value bookings (new deal wins) stood at $2,384 million, up 6 per cent YoY (16 per cent QoQ).