HCL Technologies Q4 Results Review - Cautious On Ramp Downs, Discretionary Spends: IDBI Capital

IDBI Capital Report

HCL Technologies Ltd. reported 15.8% constant currency organic growth in FY23E led by market share gains. The company’s Q4 IT services revenues was also healthy up 0.6% QoQ led by ramp of mega deals won.

Going forward the company has guided FY24E revenue growth of 6-8% YoY and Ebit margins of 18-19% for FY24E. We expect HCL Tech to be at the lower end of the guidance mainly led by lower annual contract value growth (up 4.3% YoY versus 21% YoY in FY22).

Further, we expect ramp downs in projects, delay in renewals and lower discretionary spend to further impact revenue growth. 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 1.7% and 1.6% for FY23E and FY24E.

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