HCL Tech share price hits new 52-week low as Q1 net profit misses estimates; should you buy or sell?

HCL Technologies share price opened more than 2% lower on Wednesday morning, hitting a fresh 52-week low, after the company’s April-June financial results missed street expectations.

HCL Tech share price hits new 52-week low as Q1 net profit misses estimates; should you buy or sell?
On Wednesday morning HCL stock was trading at Rs 905, down 2.47%. (Image: REUTERS)

HCL Technologies share price opened more than 2% lower on Wednesday morning, hitting a fresh 52-week low, after the company’s April-June financial results missed street expectations. HCL Tech posted an 8.6% sequential drop in net profit to Rs 3,283 crore for Q1FY23. The tech firm declared an interim dividend of Rs 10 per equity share of Rs 2 each of the company for the current financial year. HCL Tech share price has fallen 21% so far this year, underperforming the headline domestic stock indices. On Wednesday morning HCL stock was trading at Rs 905, down 2.47%.

HCL Tech Q1FY23 financial results at a glance

-Revenue came in at Rs 23,464 crore, up 16.9% on-year basis; 3.8% increase on-quarter.

-Net profit was Rs 3,283 crore, up 2.4% on-year basis; 8.6% fall on-quarter.

-EBITDA was reported at Rs 4,975 crore, down 1.7% on-year; 1.5% fall sequentially.

IT and Business services segment registered a revenue growth of 18.1% on-year basis. While Engineering and R&D Services saw a growth of 23% from the previous year. “Strong client addition across all categories. On YoY basis, US$ 100 mn+ clients up by 3, US$ 50 mn+ clients up by 5, US$ 20 mn+ clients up by 23, US$ 10 mn+ clients up by 35, and US$ 5 mn+ clients up by 27, US$ 1 mn+ clients up by 63,” said HCL Technologies. It added 6,023 freshers in April-June quarter. The company’s attrition rate rose to 23.8% in the quarter on a 12-month basis, a rise from 21.9% in the March quarter and 11.8% in the same quarter of last year.

Analysts’ view

HCL Tech reported subdued results for the quarter with margins below expectations, said Mitul Shah – Head of Research Associate at Reliance Securities. “We expect HCL Technologies to report a healthy revenue, driven by consistent transformation deal wins, increasing focus on ER&D services and rising share of Mode 2 business. At present, we have BUY recommendation on the stock with a 1-year target price of Rs1,351,” Mitul Shah said. HCL Tech shares were trading at a new 52-week low of Rs 905 per share on Wednesday. 

Holding a less bright rating, ICICI Securities reiterated their ‘Hold’ rating on the stock adding that the results vindicate their cautious stance. “We do believe HCL Tech’s underperformance in growth and margins w.r.t. to peers will continue & value it at 16x (10-year average) earlier 17x on FY24 EPS to arrive at a fair value of Rs 894. Maintain HOLD rating,” they added.

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