HCL Technologies share price jumped nearly 3 per cent to Rs 1,135 apiece on BSE in Friday’s trade, after the IT major posted a 226 per cent growth in its consolidated profit after tax (PAT) at Rs 3,593 crore in Q4. The company posted a net profit of Rs 1,102 crore in the corresponding quarter of previous year. HCL Technologies has also declared an interim dividend of Rs 18 per equity share of Rs 2 each with a record date of 29 April 2022. The said dividend will be paid on 11 May 2022. At least four research and brokerage firms see up to 27 per cent potential upside in HCL Tech stock price.
Emkay Global Financial Services
Rating: Buy; Target: Rs 1,400; Upside: 27.4%
HCL Tech delivered broadly in line operating performance in Q4. Broad-based demand, robust deal intake and pipeline augur well for revenue acceleration. The IT major 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. Emkay Global Financial Services 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. It maintained buy with a TP of Rs1,400 at 22x Mar’24E EPS considering attractive valuations, steady cash generation and 4% dividend yield.
Motilal Oswal Financial Services
Rating: Buy; Target: 1,310; Upside: 19%
Analysts at Motilal Oswal Financial Services said that strong sequential growth within services, robust headcount addition, healthy deal wins, and a solid pipeline indicates an improved outlook. Given its deep capabilities in the IMS space and strategic partnerships, investments in Cloud, and Digital capabilities, it expects HCL Tech to emerge stronger on the back of an expected increase in enterprise demand for these services. The stock is trading 18x FY24E EPS, which offers a margin of safety.
Rating: Accumulate; Target: Rs 1,247; Upside: 13%
Nirmal Bang believes HCL Tech will see negative impact of the stagflationary environment developing in the western world, which may impact tech spending towards 2HFY23 and affect its FY23 guidance and hence we have lowered our USD revenue estimate by 2% for FY23/FY24 and kept margin estimates constant, leading to a modest cut in EPS estimates. However, it believes HCL Tech is better placed in the new demand environment due to its enormous automation related skills and IP.
Rating: Accumulate; Target: Rs 1,169; Upside: 6.3%
Prabhudas Lilladher downgraded HCL Tech to accumulate (earlier uy) as it cut DCF based target price to Rs 1169 (earlier Rs. 1295) led by decline in margin profile, volatility in P&P revenue dragging down overall revenue growth, increase in risk free rate, and moderation in terminal growth rate. It cut EPS estimates by 4%/5% for FY23/24, led by a cut in EBIT margin estimates by ~50-70 bps.
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