The management of HCL Technologies expects a strong H2 amidst an uncertain environment; Should you invest?
HCL Tech Shares After Q2 Earnings: HCL Technologies share price rose 4 per cent to the day’s high of Rs 1,266.50 on the NSE in the early trade on Friday following the Q2FY24 earnings. Both profit and revenue were above Street’s estimates.
The decline in revenue was a result of a more pronounced slowdown in demand, due to lower discretionary spending in the IT sector, and reprioritisation of spending to core operations, said analysts.
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IT services company HCL Technologies on Thursday reported a 10 per cent growth in its consolidated net profit at Rs 3,832 crore for the quarter ended September 2023. The same stood at Rs 3,489 crore in the last year period. Revenue from operations during the period rose 8 per cent to Rs 26,672 crore as against Rs 24,686 crore in the corresponding quarter last year.
HCL Tech cut the FY24 revenue growth guidance in constant currency terms to 5-6 per cent, maintaining the margin guidance of 18-19 per cent, which came largely in line with brokerages’ expectations.
Although, BofA remained neutral on HCL Tech while JP Morgan gave an ‘Underweight’ rating.
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UBS reiterated a neutral view on HCL Tech shares though it raised the target to Rs 1,350 from Rs 1,320. The cut in guidance was expected though the margin beating estimates was unexpected, it said.
Goldman Sachs has maintained a neutral stance but raised target price to Rs 1,180 from Rs 1,170. EBIT was 5 per cent ahead of estimates and the company maintained its FY24 margin guidance, it said as it noted lower FY24-26 topline by up to 1 per cent and EBIT estimates higher by up to 1 per cent on better-than-expected cost control.
Kotak has also maintained a buy on HCL for an unchanged price target of Rs 1,410 as HCL Tech made what it called ‘marginal tweaks’ to its estimates. “We anticipated disappointment on elevated ask rates for the FY2024E revenue guide. We make marginal tweaks to our estimates owing to disappointment in the services segment. Our US$ revenue estimates are lower by 0.3-0.8 per cent over FY2024-26E,” the brokerage said.
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Multiple years of investments in digital have allowed HCLT to have a balanced portfolio of business and drive consistent growth, Kotak opines.
Motilal Oswal has a buy view on HCL Tech for a price target of Rs 1,410 based on 21x FY25E EPS. The IT company reported a weak 2QFY24 as revenue grew just 1 per cent QoQ in constant currency which was below Motilal’s estimates of 2.9 per cent QoQ. “We have lowered our FY24/25 EPS estimates by 1.6/3.0 per cent to account for the 1Q miss,” it said.
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