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Reliance Securities
HCL Tech (Buy)
CMP: ₹996.05
Target: ₹1,220
HCL Technologies’ 2QFY19 revenue rose 2.1 per cent q-o-q in dollar terms (3 per cent q-o-q in CC terms), with engineering services growing 5.9 per cent q-o-q.
The IT major maintained its guidance of 9.5-11.5 per cent revenue growth in CC terms for FY19E, while EBIT margin guidance was maintained at 19.5-20.5 per cent.
Mode 1 revenue rose 0.3 per cent q-o-q in dollar terms, Mode 2 rose 4.7 per cent q-o-q and Mode 3 rose 10.6 per cent q-o-q aided by Actian.
HCLT has consistently won $1 billion worth of new deals over the past few quarters, driving revenue visibility.
The IT major’s IP investments should bear fruit over the next few quarters, driving revenue/profit growth.
We expect HCL Technologies to report around 11 per cent USD revenue CAGR over FY18-FY20E.
Valuation at 12.1x FY20E EPS is fairly attractive, providing good downside support.
We have a BUY rating on HCL Technologies, with a target price of ₹1,220.
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