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Target: ₹930
CMP: ₹982.05
HCL Technologies’ (HCLT IN) Q2 CC growth stood at 3.8 per cent q-o-q, ahead of Consensus estimates of 3 per cent and our estimates of 2.1 per cent. The services business grew 5.3 per cent q-o-q in CC while products and platform business revenue declined 7.8 per cent q-o-q CC.
Services growth composition improved, led by broad-based growth across verticals and geographies except for flat BFSI and retail vertical revenue. The manufacturing vertical was up 10.9 per cent q-o-q CC, life sciences was up 5.1 per cent q-o-q CC, and public services up 6 per cent q-o-q CC.
For FY22-25, we expect a USD sales CAGR of 8.7 per cent, an EBIT CAGR of 13.3 per cent and a APAT CAGR of 10.2 per cent. We raise our EPS by 4.4 per cent for FY24 and by 1.4 per cent for FY25, largely driven by revised USD-INR assumption of 83.5 for FY24 and 84.5 for FY25.
We retain Reduce with a TP of ₹930 based on 15.2x September 2023E earnings (five-year average). We remain wary of business volatility, especially in the products and platform business. Key downside risk is acute recession in the West.
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