HCL Tech shares at Rs 1,000 or Rs 1,250? What Jefferies, Nomura, 10 others say post Q4 results

HCL Technologies (HCL Tech) March quarter results saw no negative surprises and missed the Street estimates by a whisker. The FY24 growth guidance by the Noida-based software and consultancy firm was strong when compared with peers.   

Jefferies said HCL Tech's dollar revenues at $3.2 billion, which were down 1.2 per cent in constant currency terms, were in line with estimates and at the lower end of HCL Tech's guidance range. EBIT margins at 18.2 per cent were down 140 bps sequentially and missed estimates due to higher direct and SG&A costs. However, profit at Rs 3,980 crore was ahead of estimates due to higher than expected other income.

"Deal wins were down 8 per cent YoY to $2.1 billion but the management guidance of 6-8 per cent growth in FY24 is relatively healthy. Margin guidance of 18-19 per cent in FY24 versus FY23 margins of 18.2 per cent suggests limited margin improvement in FY24. Dividend payout at Rs 48/share remains strong," Jefferies said while suggesting a target of Rs 1,050 on the stock.

Like Jefferies, Nomura India does not see much upside for the stock. This brokerage has lowered its FY24-25F EPS estimates for HCL Tech by 4 per cent, driven by expectations of lower revenue and margin and higher tax rates. Nomura has a target of Rs 1,100 on the stock against Rs 1,150 earlier.

Motilal Oswal has set a target of Rs 1,250 for HCL Tech, Kotak Institutional Equities at 1,225. Nuvama Institutional Equities sees the stock at Rs 1,220. Reliance Securities finds the stock worth Rs 1,160 while Emkay Global sees it at Rs 1,150; ICICI Securities has a target of Rs 1,065 on the stock; Nirmal Bang Institutional Equities and Elara Securities value the stock at Rs 1,020. JM Financial has cut its target on the stock to Rs 1,080 from Rs 1,190.

HCL Technologies clocked a 10.80 per cent year-on-year (YoY) rise in net profit at Rs 3,983 crore on 17.70 per cent YoY rise in net sales at Rs 26,060 crore for the quarter.

For the quarter, HCL Tech won 13 large deals. Total contract value (new deal wins) for the quarter, however, fell 8 per cent YoY to $2,074 million. "Our pipeline is near an all-time high, which reflects our differentiated business mix and strong client demand for our offerings," CEO Vijayakymar said.

The IT major announced a dividend of Rs 18 per share. With this, total dividend announced by HCL Tech for FY23 stood at Rs 48 per share, which was equal to 87.50 per cent of its earnings per share.

"We expect the company to be at the lower end of the guidance mainly led by lower ACV growth. Further, we expect ramp downs in projects, delay in renewals and lower discretionary spend to further impact revenue growth. In addition, due to headwinds like wage hikes and lower ability to manage cost in uncertainty we have assumed margins at the lower end of guidance (18 per cent)," said IDBI Capital which has a target of Rs 1,010 on the stock.

 

 

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