HCLTech Q3 Review - Robust Results With Strong Deals, Albeit With Lower Guidance: Axis Securities

Axis Securities Report

In Q3 FY24, HCLTech Ltd. reported revenue of Rs 28,446 crore, up 6.5% QoQ which stood above our expectations. The company’s operating profit stood at Rs 5,615 crore, reporting a growth of 13.8% on a QoQ basis.

Beating our expectations, the company’s operating margins, too, expanded by 130 basis points to 19.8%, which was largely led by lower operating expenses, lower onsite expenses, and higher product business during the quarter.

Its net profit for Q3 FY24 stood at Rs 4,350 crore, registering growth of 13.5% QoQ.

Outlook

We believe HCLTech is well-placed for encouraging growth from a long-term perspective given its multiple long-term contracts with the world’s leading brands.

Richer revenue visibility gives us confidence in its business growth moving forward. However, rising concerns over business uncertainties in large economies and continuing supplyside constraints are creating challenges for the company’s growth prospects moving ahead.

Valuation and recommendation

We recommend a 'Hold' rating on the stock and assign a 20 times price/earning multiple to its FY26E earnings of Rs 80.3/share to arrive at a target price of Rs 1,610/share. The target price implies an upside of 4% from the current market price.

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