HCL Tech Hits 52-Week Low After Q1 Result Misses Estimates; Should you Buy, Sell or Hold?

HCL Tech Share Price Today: The June quarter performance of HCL Technologies was less sombre than what analysts’ average estimates had portrayed. The country’s third-largest IT exporter also reported robust growth in deal wins and continued to add headcount in a bid to tackle higher attrition. HCL Q1 results were declared post-market hours yesterday.

The company reported 8.6 per cent sequential decline in consolidated net profit at Rs 3,283 crore for the quarter ending June 2022. It reported consolidated net profit of Rs 3,593 crore in the previous quarter. On annual basis, HCL Tech‘s net profit rose 2.4 per cent.

The company’s consolidated revenue grew 4 per cent sequentially at Rs 23,464 crore in the June quarter and nearly 17 per cent higher on an annual basis. The company declared interim dividend of Rs 10 per equity share of Rs 2 face value. In its FY23 guidance, the company said revenue is expected to grow between 12-14 per cent in constant currency terms.

“As technology becomes central to lives and businesses, HCL is accelerating the digital transformation journeys of its clients. We continue to pursue our growth strategy with a sense of purpose and responsibility toward our stakeholders and communities,” said Roshni Nadar Malhotra, Chairperson, HCL Technologies Ltd.

Should you Invest?

Mitul Shah- head of research associate at Reliance Securities said, “HCLT reported subdued results for the quarter with margins below our expectations. Services business revenue (89.8 per cent of topline) grew 2 per cent QoQ and 19 per cent YoY in constant currency which we consider is healthy. We expect HCLT to report a 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 a BUY recommendation on the stock with a 1-year target price of Rs1,351.”

Religare Broking in a note said: “HCL Tech management continued with the same guidance for revenue and EBIT margin. Revenue is expected to grow between 12-14 per cent in constant currency while EBIT margin to be in between 18-20 per cent and they expect it to be more towards the low end.”

“We have estimated growth of its revenue (INR term) and EBIT at a CAGR of 13.7 per cent and 15.1 per cent over FY22-24E. HCL Tech is trading at a comfortable valuation of 14.2x EPS FY24E as compared to large-cap peers. We continue to maintain a Buy rating with a target price of Rs 1,333,” it added.

Holding a less bright rating, ICICI Securities reiterated their ‘Hold’ rating on the stock adding that the results vindicate their cautious stance. “We do believe HCL Tech’s underperformance in growth and margins w.r.t. to peers will continue & value it at 16x (10-year average) earlier 17x on FY24 EPS to arrive at a fair value of Rs 894. Maintain HOLD rating,” they added.