Emkay Global Financial has given Buy recommendation for HCL Tech with a target price of Rs. 1400 in its research report issued on Apr 22, 2022

Emkay Global Financial’s report on HCL Tech

HCLT delivered broadly in line operating performance in Q4. Revenue grew 0.5% QoQ to USD2.99bn (1.1% CC) on the back of continued traction in Services (5% CC). Products & Platforms declined 24% CC due to seasonality. EBITM declined by 110bps to 17.9%. It signed 6 large services and 4 product deals across technology & services, life sciences & healthcare and public services verticals for a total new deal TCV of USD2.3bn (6% QoQ). Broad-based demand, robust deal intake and pipeline augur well for revenue acceleration. HCLT has guided for revenue growth of 12-14% CC in FY23 on the back of continued traction in the services business, healthy deal intake and deal pipeline (close to all time high). It has guided for 18-20% EBITM guidance for FY23, considering supply-side challenges and planned investments in Mode 2 capabilities and markets.

Outlook

We cut FY23/FY24 EPS estimates by 3%/2.7%, factoring in Q4 performance and FY23 guidance. Revenue growth momentum is encouraging; however, pressure on Services margin led to earnings cut. We maintain Buy with a TP of Rs1,400 at 22x Mar’24E EPS considering attractive valuations, steady cash generation and ~4% dividend yield.

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