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IDBI Capital Report
HCLTech Ltd.'s Q3 FY24 results were above consensus. The company's revenue growth of 5.9% QoQ was due to 32% QoQ growth in products business.
HCLTech has tapered the upper end of the guidance from 5-6% to 5-5.5%. We believe it will be at the top end of the guidance led by traction in engineering research and development and ramp up of mega deal wins.
Going forward, we expect HCLTech to benefit from higher spend in automotive ER&D, improvement in discretionary spend, Gen AI, ramp of large deals and improvement in products business.
Hence, we expect 9.6% YoY and 10% YoY growth in FY25E and FY26E revenues.
We have revised margin estimates upwards leading to earnings per share of upgrade of 1.7% in FY25E.
However, considering the recent run up in price we maintain 'Hold' rating on the stock with a revised target price of Rs 1470 (20 times FY26E EPS, introduced FY26E) (versus Rs 1,165 earlier).
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