Prabhudas Lilladher’s research report on HCL Technologies
HCLT reported big miss on revenue with growth of 2.6% QoQ USD (Ple: 4.5%, 4.4%) led by decline in Products (P&P) business (-8.8% QoQ CC, ~12% of revenue) due to slippages in contract closures. Q3 being seasonally strong quarter for P&P management expects some portion of contract deferments to close in Q3. Management has given guidance of 0-1% YoY CC for Product business which translates average growth of 5% QoQ USD in next 2 quarter to deliver growth of 0.2% YoY in P&P. IT services (+4.1% QoQ USD) & ER&D (+5.3% QoQ USD) reported strong growth after muted last quarter. Growth in ER&D is back led by digital engineering and strong recovery in asset heavy industries.
We estimate revenue growth of 11.7%/13.2%/11.8% for FY22/23/24. We arrive at DCF based TP of INR 1386 (implied target multiple of 21x on FY24 EPS). HCLT is currently trading at 21.4/19 on FY23/24E EPS of INR 58.5/66 of respectively. Maintain Buy!
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