HCL Technologies Share Price Updates for July 15, 2024: HCL Technologies stock surges over 3% after Q1 results

Shares of HCL Technologies closed at ₹1,568 on the NSE and BSE, inched up by 0.50% and 0.49%, respectively.

HCL Tech reported mixed numbers for Q1FY25 with YoY revenue as well as PAT growth while EBIT margin seen a 21 bps jumps YoY. Going ahead, management has retained its guidance for FY25. Management commentary suggests discretionary spending pressure and delayed decision making remains but they also expects growth to resume in 2Q across all verticals and markets except BFSI. Further, HCL has developed Gen AI platforms such as AI Force and GenAI Enterprise Foundry to capitalize GenAI led demand and growth. On the financial front, we estimate its revenue/EBIT to grow by CAGR of 6.7%/9.4% over FY24-26E and we have revised our rating to Accumulate with the target price of Rs 1,759. 

Shares of HCL Tech traded at ₹1,579.50 on the NSE, up by 1.24% as at 12.45 pm.

HCL Technologies (HCLT) has reported in-line growth and margin for Q1FY25. IT and business services declined 1.8% QoQ USD, ER&D services declined 3.7% QoQ and products and platforms fell 0.9% QoQ. It maintains FY25 guidance of 3-5% revenue growth and 18-19% EBIT margin, which is already built in the price and we see limited positive triggers for HCLT in FY25. With Q1 print, HCLT needs 0.8-2.2% CQGR for the remaining three quarters. HCLT faces several headwinds in FY25 including: 1) ASAP acquisition integration, 2) State Street divestment- 80-90bps impact on revenue growth to fall in Q2 and 3) slow growth in ER&D segment. Factoring this in, we revise FY26/27E EPS by <1%. We value HCLT on SoTP basis – services (IT and ER&D) at 22x and products at 18x on FY26E EPS and maintain our TP at ₹1,455. Retain REDUCE on soft H1FY25. 

In 1Q FY25, slight beat to estimates. HCLT’s 1QFY25 revenue of $3,364mn (-1.6% q-q, +5.6% y-y) in constant currency was slightly ahead of the consensus estimate of a 1.9% qoq decline. IT Services and Engineering & R&D Services declined 1.5% and 3.5% qoq, respectively, while Products and Platforms was up 0.4% qoq, in cc terms. Net new deal wins at $1.96bn were up 22.5% yoy. EBIT margin of 17.1% (-50bp q-q, +10bp y-y) was broadly in line with the consensus estimate of 17%. Other income included a $70mn one-time income from State Street JV divestment. EPS at Rs 15.7 was up 20% yoy. Retains FY25E revenue growth guidance of 3-5% in cc. HCLT has retained its 3-5% y-y revenue growth guidance for FY25E in cc terms, which does not factor in an improvement in discretionary demand vs FY24. HCLT notes that it is seeing certain signs that discretionary demand may have bottomed out, but it is too early to call with certainty. In our recent India IT Services Sector report, we highlight that discretionary demand is unlikely to worsen further based on our proprietary G2000 database..

Focus Today (Trend Positive – Gift Nifty is up 80 points 0.4% - focus on IT stocks – FIIs over Rs4000cr net buyers and Net direct tax collection grow 24%. HDFC Life an HDFC AMC results. ) – US market closed record high and Dow closed above 40000 mark on rate cut expectation by the US Fed. Direct Expect rally on IT stocks to continue after Nifty IT majors TCS and HCL Tech announced better than expected Q1 results. Net direct tax collections grew over 24% touching Rs 5.74 lakh crore till July 11. ADR/GDR – Wipro up 3%. Infosys up 2.5%. Both L&T and Axis Bank rose 1% each. Both Goldman Sachs and Morgan Stanley results this week. ECB meeting, Fed chairman speech, US retail sales and political trend in US following attack on Trump. 

Today’s Market Outlook – Better than expected both HCL Tech and TCS results, solid net direct collection, rate cut hope lifted US market to record high and consistent FIIs buying interest in the domestic market, may open equity market on a strong note. Gift Nifty is up 102 points or 0.4%. Previous day, solid buying interest in IT stocks lifted the Nifty nearly 1% to close at a record high. FIIs were net buyers over Rs4000cr on Friday.

Investec on HCL Tech: Maintain Sell on Company, raise target price at Rs 1312/Sh (Neutral) 

Citi on HCL Tech: Maintain Neutral on Company, raise target price at Rs 1545/Sh (Neutral) 

JP Morgan on HCL Tech: Maintain Neutral on Company, target price at Rs 1510/Sh (Neutral) 

CLSA on HCL Tech: Downgrade to Hold on Company, raise target price at Rs 1556/Sh (Neutral) 

HCL Tech (HCLT) reported soft Q1FY25 results, but better than estimates. Revenue at USD3,364mn (-1.6% CC QoQ)–IT services fall of -1.5% CC QoQ is better than our/Street’s estimate of -2.1%/-1.9% QoQ. Consolidated EBIT margin of 17.1% beat our/Street’s estimate of 16.8%/17.1%. TCV at USD1.96bn (-14% QoQ/ +25% YoY) is decent. Management expects growth to revert in Q2 and maintained its FY25 revenue guidance of 3–5% YoY CC and margin guidance of 18–19%. We are tweaking FY26E EPS by -3.6% on slightly lower margin assumption. We are introducing FY27 estimates and rolling forward our valuation to 24x Sep-26 PE (earlier 23x) on better growth visibility. Maintain ‘BUY’ with a TP of INR1800 (INR1700 earlier).

HCL Technologies (HCLT IN) – Pritesh Thakkar, Research Analyst, Prabhudas Lilladher Pvt. Ltd.

Rating: BUY | CMP: ₹1,560 | TP:₹1,790

Q1FY25 Result Update – Gearing up for growth from Q1 trough

Quick Pointers:

§ Better-than-expected Q1 performance de-risking the path to achieve the guidance band

§ Margins to be under pressure, likely to be in the lower band 

HCLT reported Q1FY25 revenue of US$ 3.36bn, down 1.6% QoQ CC above our and consensus est. of 1.9% QoQ CC, while dollar terms revenue declined by 1.9% QoQ. IT & Business Services and ER&D declined by 1.5% and 3.5% QoQ CC, while P&P was flat QoQ CC. EBIT margin declined by 50bps QoQ to 17.1%, in line with consensus. Surprisingly, IT Services margin was flat QoQ. The company’s deal win in the quarter was normalized to US$ 1.96bn vs last quarter, down 14.4% QoQ. Despite the revenue decline, the company’s performance exceeded Q1 expectations. We believe this could support the company achieve FY25 rev. guidance band of 3-5% YoY CC.

The anticipated Q1 performance impact was largely attributed to the project transitioning (BFSI) from onsite to offshore coupled with passing seasonal productivity commitment (concentrated on Mfg). Q2 would again have an adverse topline impact of 80bps (consolidated level) due to the JV divestment. Despite the fact, the management is confident of revenue growth both at consolidated level and in the Services segment in Q2. The management’s confidence is underpinned by earlier deal wins that have gone for executions, instead of building any optimism or constructive recovery on the discretionary spends. Additionally, the management anticipates sharp recovery within the ER&D space partly led by Q1 seasonal impact within Mfg and partly by anticipated growth recovery within ASAP after the Q1 trough. With underlying demand environment and clients’ sentiment towards discretionary spends continue to be at earlier pace, we are broadly keeping our revenue estimates unchanged. The Q1 margin weakness is likely to be compensated by an uptick in high-margin businesses (ER&D and P&P) in 2Q/3Q. We expect the company to report margins in the lower range of the guidance band (18-19%), as the anticipated fresher hiring (10k in FY25) would keep a tight band for utilization and productivity improvement. 

Valuations and outlook: Given its defensive business mix and resilient vertical portfolio, HCLT is well positioned to capture the boarder market theme and participate in the critical aspects of enterprise operations. Even if it delivers in the mid-range of the revenue guidance, it would end up achieving growth above the peer average. We are baking in USD revenue growth of 4.7% and 10% YoY with margin improvement of -20bps and 90bps for FY25E and FY26E, respectively. The stock is currently trading at 22.2x FY26E. We maintain “BUY” on HCL Tech assigning PE of 25x to FY26E with a target price of ₹1,800.

Find here all the live updates related to Sensex, Nifty, BSE, NSE, share prices and Indian stock markets for July 15, 2024

The stock hit a 52-week high on the NSE on February 23, 2024, at ₹1,697.35. 

HCL Technologies stock rose 3.17% on the NSE, trading at ₹1,609.70 as at 9.31 am.

Noida-based information technology giant, HCL Technologies (HCLTech), on Friday reported a consolidated net profit of ₹4,257 crore for the first quarter (Q1) ended June, up 20.4 per cent year-on-year, compared with ₹3,534 crore in the corresponding period last year.

Consolidated revenue for the quarter in review rose 6.6 per cent y-o-y to ₹28,057 crore.

The Board of Directors declared an interim dividend of ₹12 per equity share of ₹2 each for the financial year 2024-25. The company has a fixed record date of July 23 for the payment of the interim dividend, the company said, adding that the payment date of the said interim dividend will be August 1.

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