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Geojit Financial
HCL Tech (Buy)
Target: ₹1,409
CMP: ₹ 1,199.15
HCL Technologies Ltd. provides software development business process outsourcing, information technology and infrastructure services.
Consolidated revenue grew 15.7 per cent y-o-y (+8.1 per cent q-o-q), fueled by strong demand momentum. This was the highest growth recorded in the last 47 quarters exceeding the management’s expectations.
EBITDA was down by 4.1 per cent y-o-y (+7.4 per cent q-o-q) mainly due to higher Employee benefit expenses (+24.9 per cent y-o-y). As a result, PAT declined 13.3 per cent y-o-y (+5.6 per cent q-o-q), further impacted by higher taxes.
Company continues to pay dividend of ₹10/share for the quarter, totaling to ₹32 per share till date in FY22.
Near-term outlook remains cautious, as we have already seen a contraction of margins in this quarter, and we expect the seasonal impact of P&P segment in Q4-FY22 to weigh down the company’s financials. However, looking at company’s strong pipeline and expected increase in enterprise demand, we remain optimistic about the company’s performance in medium to long term.
We reiterate our Buy rating on the stock with a rolled forward TP of ₹1,409 based on 22x FY24E adj. EPS.
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