HCL Technologies Ltd
HCL Technologies share price shed over 2 percent intraday on July 20, a day after the company declared its Q1 results.
The IT player on July 19 posted a 9.9 percent year-on-year (YoY) rise in its June quarter consolidated net profit at Rs 3,214 crore. Revenue for the quarter came in at Rs 20,068 crore, up 12.5 percent YoY. Sequentially (quarter-on-quarter), profit rose 8.5 percent while revenue increased 2.2 percent.
The company’s Q1 FY22 results failed to meet market estimates as a CNBC-TV18 poll of analysts had estimated the company’s profit at Rs 3,253 crore and revenue at Rs 20,303 crore. EBITDA margin was 24.5 percent while EBIT margin stood at 19.6 percent for the said quarter. Revenue in constant currency (CC) terms grew 0.7 percent QoQ and 11.7 percent YoY.
The stock was trading at Rs 972.75, down Rs 27.45, or 2.74 percent. It has touched an intraday high of Rs 1,008 and an intraday low of Rs 969.50.
Here is what brokerages have to say about the stock and the company after Q1 earnings:
CLSA: Rating: Buy | Target: Rs 1,180
The brokerage firm is of the view that the company’s revenue was a miss due to transient factors. It expects momentum to come back strongly in Q2. “Deal wins in Q1 were healthy with an all-time high pipeline. We trim FY22/FY23 EPS estimates by 2 percent/1 percent. Risk-reward attractive at current levels,” it added.
Morgan Stanley | Rating: Equal-weight | Target: Rs 1,065
Q1 results stood out against peers in terms of slower QoQ growth. It gave lack of positive surprises on FY22 guidance and a weak margin YoY.
Expect large valuation discount against larger peers to persist, Morgan Stanley said.
UBS | Rating: Sell | Target: Rs 855
The brokerage firm believes that the Q1 miss is unlikely to please as FY22 guidance remains unchanged. It expects cuts to consensus forecasts, which could spur a negative reaction for the stock
Motilal Oswal | Rating: Buy | Target: Rs 1,180
HCL Tech delivered a growth of 0.7 percent QoQ (CC), below our estimate of 2.4 percent, led by weak growth in IT Services (+0.5 percent) and Products & Platforms (-1 percent), but partially compensated by better than expected ER&D (+4.5 percent). Excluding the impact of a one-time bonus in 4QFY21, EBIT margin was down 80bp QoQ and missed our estimate by 130bp due to COVID-related expenses of 90bp. While its FY22 growth guidance for the Products and Platforms business remains in low single-digits, we remain confident of HCLT growing in low teens on the back of an improvement in IT Services and ER&D verticals. We continue to see higher potential for the Products and Platforms vertical in the medium term and expect it to return to double-digit growth in FY23E (we estimate 13.6 percent CC USD growth).
We downgrade our FY22E/FY23E EPS estimate by 4 percent. We factor in a revenue miss and lower growth in the Products and Platforms business. We have reduced our margin estimate to factor in higher sales and marketing investments in FY22E. We maintain our Buy rating as we expect traction in the Services business in 2HFY22E and FY23E, driven by higher IMS/Cloud focused deals. Our target of Rs 1,180 per share implies 20x FY23E EPS.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.