HCL Tech Q1 Results Review - Client Specific Challenges To Impact Near Term Growth: IDBI Capital

IDBI Capital Report

HCL Technologies Ltd. reported weak results (revenue down 1.3% QoQ) mainly due to weakness in tech and telecom vertical.

As highlighted in our IT thematic we were seeing weakness in HCL Tech clients. We continue to believe that macro challenges will impact HCL Tech’s near term revenue growth.

Hence, we maintain our stance of company’s revenue to be at the lower end of the guidance mainly led by lower annual contract value (down 21% YoY), client specific challenges and slowdown in discretionary spends.

In addition, due to headwinds like wage hikes and lower ability to manage cost in uncertainty we have assumed margins at the lower end of guidance (18%).

Consequently we have lowered our earnings per share estimates by 2% for FY25E. Hence, we maintain our 'Hold' rating on the stock with a revised target price of Rs 1100 (18 times price-to-earning on FY25E EPS).

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