HCLTech - Resilient Service Business To Drive Incremental Growth: Motilal Oswal

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..Motilal Oswal Report.Service business poised to rebound strongly HCLTech Ltd.’s operating performance has relatively been steady for the consolidated business, while the service business (IT plus engineering research and development) has delivered remarkable performance over the last two years, up ~15% YoY in constant currency terms each in FY22 and FY23. The near-term service business has been adversely impacted by reduced discretionary spends, which is expected to see a sharp recovery (especially ER&D service line) as the macro challenges taper off. The ER&D service line has been resilient, evidenced by a strong uptick in demand post Covid. We remain positive on the structural theme of ER&D outsourcing and HCLTech should win disproportionately and clock 15.5% revenue compound annual growth rate over FY24-26E, given its capabilities and scale within the space. We expect IT and business service (~75% of rev) to deliver moderate growth of 9.5%/11.5% in FY25E/FY26E, aided by mega deal ramp-up and robust BTB. On the earnings front, the company is intensifying efforts to optimise the employee pyramid and eliminate the overutilization of subcontractors. HCLTech’s earnings growth has relatively been stable compared to the earnings growth of its peers, despite the fact that the company is expected to clock 15.3% CAGR over FY24-26E..Click on the attachment to read the full report:.Capital Small Finance Bank IPO - Investment Rationale, Issue Details, Peer Comparison, Risks: Anand Rathi.DISCLAIMERThis 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.

HCLTech - Resilient Service Business To Drive Incremental Growth: Motilal Oswal

HCLTech is currently trading at 21 times FY26E EPS, which we see as inexpensive compared to the industry (close peers) median of 26 times.

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HCLTech - Resilient Service Business To Drive Incremental Growth: Motilal Oswal

HCLTech is currently trading at 21 times FY26E EPS, which we see as inexpensive compared to the industry (close peers) median of 26 times.

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