Despite the FY25 guidance cut, tech giant HCL Tech is recommended to buy with a target price as high as Rs 1,700. Motilal Oswal, Prabhudas Lilladher and Emkay Global have recommended BUY, ACCUMULATE and ADD on HCL Tech. The reason why these brokerages are optimistic about HCL is because the company is in a far better position than its peers, and its outlook is optimistic. HCL's profitability declined sequentially, however, revenue stayed stable. The company has also declared a dividend payout of a whopping 900%.
HCL Tech Share Price:
On BSE, HCL Tech's share price stood at Rs 1367.55 apiece, with a market cap of Rs 3,71,107.27 crore on April 30. The stock was down by 1.41% on the day.
However, HCL's 52-week high and low is at Rs 1,696.50 and Rs 1,048 apiece.
YTD, the stock is down by 7.8%. However, in a year, the stock advanced by 28%.
HCL Tech Dividend:
HCL Tech's board has declared an interim dividend of Rs 18/- per equity share of Rs.2/- each of the Company for the Financial Year 2024-25. The Record date of May 7, 2024, fixed for the payment of the aforesaid interim dividend has been confirmed by the Board of Directors. The payment date of the said interim dividend shall be May 15, 2024.
In percentage terms, the dividend payout is 900%.
HCL Tech Q4 Earnings:
Net income was at Rs 3,986 Crore (14.0% of revenue), down 8.4% QoQ & up 0.1% YoY. EBIT stood at Rs 5,018 Crore (17.6% of revenue), down 10.6% QoQ & up 3.8% YoY in Q4FY24. While revenue in Indian rupees was at Rs 28,499 Crore, up 0.2% QoQ & up 7.1% YoY. In constant currency, the revenue is up 0.3% QoQ & up 6.0% YoY. Also, Services CC Revenue is up 3.0% QoQ & up 6.7% YoY led by growth in Telecommunications, Media, Publishing & Entertainment (up 21.6% QoQ & up 39.2% YoY. Meanwhile, Digital CC Revenue is up 6.3% YoY; and contributes 37.1% of Services.
The company's TCV (New Deal wins) at US$ 2,290 million. In the quarter, the company won 21 New Large deals - 13 in Services & 8 in Software. Further, in the quarter, the company added 2,725 employees taking its total to 227,481 employees. While its LTM attrition rate is at 12.4%.
BUY HCL Tech Share Price:
Emkay Global On HCL Tech:
Net-new deal intake was healthy at USD2.29bn. The company guided for 3-5% CC revenue growth in FY25 (implying CQGR of -0.1% to +0.6%) with EBITM of 18-19%. FY25 revenue growth guidance came weaker than expected, factoring in muted growth in H1 (2% QoQ decline in Q1; State Street JV divestment to impact growth in Q2), and no material improvement in discretionary spending. We cut FY25/FY26E EPS by 5-6% factoring-in weak Q4 & FY25 guidance and slow progress on medium-term margin aspirations.
The stock delivered a 16%/38% return in the last 6M/12M, outperforming the Nifty IT index by 6%/15%. We remain positive over the medium term, but considering muted H1 guidance and limited upside, downgrade stock to ADD with TP of Rs1,600 at 23x Mar-26E EPS.
Prabhudas Lilladher On HCL Tech:
Given its defensive business mix and resilient vertical portfolio, HCLT is well-positioned to capture the broader market theme and participate in the critical aspects of enterprise operations. Although the first half seems to be challenging and requires more heavy lifting in the second half. Even if it delivers at the mid-range of the revenue guidance, it would end up achieving growth near its peer's average.
However, the valuation gap is quite meaningful between 1-year forward PE (23x) and its 10-year median (16x), otherwise, any correction from here would make the valuations even more attractive. We are baking in USD revenue growth of 4.5% and 9.5% YoY with margin improvement of 10bps and 80bps for FY25e and FY26e, respectively. The stock is currently trading at 21x FY26e, we are assigning PE of 22x to FY26e with a target price of INR 1,550. With that, we assume coverage on HCL Tech with an "ACCUMULATE" rating.
Motilal Oswal On HCL Tech:
Higher exposure to Cloud, which comprises a larger share of non-discretionary spending, offers better resilience to its portfolio in the current context, with higher demand for Cloud, Network, Security, and Digital workplace services.
Given its capabilities in the IMS and Digital space, along with strategic partnerships and investments in the Cloud, we expect HCLT to emerge stronger on the back of healthy demand for these services in the medium term. The stock is trading at ~20x FY26E EPS, which offers a margin of safety. Our TP of INR1,700 is based on 23x FY26E EPS. We reiterate our BUY rating on the stock.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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