Motilal Oswal has given Buy recommendation for HCL TECHNOLOGIES recommended buy rating on the stock with a target price of Rs 1430 in its research re with a target price of Rs. 1430 in its research report issued on Oct 15, 2021

Motilal Oswal’s research report on HCL TECHNOLOGIES

HCLT delivered a 2QFY22 revenue growth of 3.5% QoQ (CC), 40bp below our estimate. While the decline in the Products and Platforms vertical (-8% QoQ CC) due to a delay in deal closure was disappointing, Services (IT + ER&D, 5.2% QoQ CC) came in better than expected. EBIT margin fell 60bp QoQ to 19% and was in line. The management reiterated its guidance of double-digit USD revenue growth and 19-21% EBIT margin for FY22, although it lowered its Products and Platforms growth to 0-1% (from low-single digits). New deal TCV of USD2.3b (+38% YoY, 14 large deals) in 2QFY22 was better than expected.

Outlook

Given its deep capabilities in the IMS space and strategic partnerships, investments in Cloud, and Digital capabilities, we expect HCLT to emerge stronger on the back of an expected increase in enterprise demand for these services. The stock is currently trading ~22x FY23E EPS, which offers a margin of safety. Our TP is based on 25x FY23E EPS. We maintain our Buy rating.

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