Buy This Stock For 28% Return, Company Reported Rs. 226Bn Revenue: Yes Securities

Brokerage firm Yes Securities suggested investors buying the stock of HCL Technologies for a 28% return in 1 year. The firm said, "We expect revenue CAGR of 15.4% over FY22‐24E, with an average EBIT margin of 19.7%."

Target Price

The Current Market Price (CMP) of HCL Technologies is Rs. 1099. Yes Securities has estimated a Target Price for the stock at Rs. 1407. The stock is expected to offer a 28% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 1099
Target Price	Rs. 1407
1 year return	28.00%

Company performance

Reported revenue of Rs. 226bn (up 0.5% QoQ in USD terms, up 1.2% QoQ in Rs. terms). The muted revenue performance was due to 24% QoQ decline in Product and Platform business (weak Q4 seasonality), which contributes 10% to revenue. IT Services segment (73% to revenue) posted robust growth of 5.2% QoQ. EBIT margin declined by 106 bps QoQ to 18%, led by higher employee cost. Management has guided that it would be able to achieve 18‐20% EBIT margin band for FY23. Deal wins remained strong as TCV of new deals were at $2,260 mn for the quarter, up 6% QoQ.

Comments by Yes Securities

According to Yes Securities, "We expect it to maintain 18% + EBIT margin for FY23 led by improving employing pyramid and positive operating leverage. Employee attrition should come in control over next few quarters. We expect revenue CAGR of 15.4% over FY22‐24E, with average EBIT margin of 19.7%. The weak seasonality in License revenue of Product and Platform segment impacted the growth of overall company. The aim of management is to convert license based revenue of P&P business to subscription based revenue that is more predictable. Telecom vertical was key contributor to Q4FY22 growth led by 5G related deals."

About the company

HCL Technologies is a next-generation global technology company. Through its worldwide network of R&D facilities and co-innovation labs, global delivery capabilities, and over 208,000+ 'Ideapreneurs' across 52 countries, HCL delivers holistic services across industry verticals to leading enterprises, including 250 of the Fortune 500 and 650 of the Global 2000. The company's cloud migration and modernization continues to drive the growth of IT services. Its deal pipeline remains healthy and has good mix of small and mid sized deals. The deal pipeline is higher than it was at end of Q3FY22.

Disclaimer

The above stock was picked from the brokerage report of Yes Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.