NDTV Profit's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer NDTV Profit's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
HDFC Securities Institutional Equities
HCLTech - Relative Strength
HCLTech Ltd. posted strong Q3 performance, supported by a sharp jump in its software business segment (seasonal), growth in services driven by Verizon mega deal ramp-up and ASAP consolidation (full-quarter impact). Importantly, the revised guidance implies a strong exit to FY24E with growth outperformance vs. peers even in FY25E.
Key positives for HCLTech include-
sustainable recovery in engineering research and development services (scale and differentiation),
steady deal flow (10% growth in new deal total contract value for nine months-FY24 at $7.5 billion which can support incremental $1.4 billion revenue in FY25E) plus strong growth across large client buckets,
uptick in fresher addition and positive headcounts adds (versus decline in peers) and commentary of strong bookings expectation for Q4 indicative of growth momentum in FY25E, and
improvement in recurring revenue profile of Software segment rendering stability and margin upside.
We maintain 'Add' on HCLTech with target price of Rs 1,700 based on 22 times FY26E.
Wipro - Jet lagged on underperformance
Wipro Ltd. delivered in-line revenue and margin performance and guided an improved trajectory for Q4. Notwithstanding the flat revenue guide for Q4 (-1.5% QoQ to +0.5% QoQ), its trajectory is ‘recovering' after a 6% drop in the quarterly revenue rate over the past three quarters.
Despite improved commentary on consulting business (bookings improvement in Capco), Wipro's growth markers remain stressed such as-
deal market-share loss to peers (including smaller peers),
broad-based decline within verticals (only a quarter of the business registering sequential growth), and
steep decline in T5 accounts (reduction in $200 million annual revenue rate over the past year) plus risks of spend rationalisation by large client.
Wipro has focused on driving growth from its partner ecosystem (six largest partners driving ~50% of expansion) and is tackling improvement in operating profile based on changes in the operating structure – portfolio focus in Asia Pacific, Middle East and Africa, absorbing growth office function within the Strategic Market Units, building Delivery cadre and impetus on training and development.
Maintain 'Reduce' on Wipro based on 17 times FY26E for a target price of Rs 450.
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.