Margins are under pressure in HCL Tech results, but the growth guidance for FY2023 is very strong, which is going to boost investor confidence.
HCL Tech Share Price: In today’s business, where there is a fall in the big stocks, the stock of HCL TECH has become the top gainer of Sensex 30. Today the stock gained more than 2.5 percent to reach Rs 1128 on the BSE. At the same time, it has reached Rs 1130 on Nifty. On Thursday, the company released its quarterly results. The results showed pressure on margins, but the growth guidance for FY2023 is very strong, which is going to boost investor confidence. Brokerage houses are also looking bullish on the stock and they believe that there will be strong growth in services going forward. The stock may outperform its largecap peers.
Strong performance in services
Brokerage house Motilal Oswal says that there has been pressure on the margins of the company. However, strong performance in Services (IT + ER&D) is a confidence booster. The organic growth in IT services has been more than 5 per cent on a quarterly basis. The brokerage says that services will further strengthen due to better momentum in cloud migration and outsourcing and the company may outperform largecap peers in the first quarter of FY2023.
Growth guidance boosts confidence
Brokerage house Jefferies has given investment advice, but has reduced the target from Rs 1440 to Rs 1360. The brokerage says that the company’s margins are disappointing, but profits have been better than expected due to forex gains and lower taxes. The growth guidance of 12 per cent to 14 per cent for FY2023 is the most positive factor. In the current financial year, the services business can see growth of 14 to 16 percent. However, the brokerage has cut the EPS estimate by 6-7 per cent due to pressure on margins and higher taxes.
Boquerage House Emkay Global has also given a buy advice in the stock and has given a target of Rs 1400. Brokerage says that HCLT has given Revenue Growth Guidance 12-14% CC for FY23. Whereas the EBITM guidance for FY23 is 18-20%. The company has bagged many strong deals and many are in the pipeline. There is strength in the services business.
Hiring increased, focus on growth
Brokerage house Motilal Oswal says that the company’s positive is also that hiring is happening continuously, the company is focusing on growth. The company’s hiring in the March quarter was 5 per cent higher on a quarterly basis. The performance of the P&P vertical has been predictable. On the margin side, the company is struggling as the supply challenges have increased. At the same time, due to higher investment, the pressure has also increased.
Profit and revenue growth forecast
Brokerage house Motilal Oswal says that HCL’s dollar revenue growth should be 14.4 percent in FY22-24 on a combined basis. At the same time, PAT CAGR during FY24E is estimated to be 11.7 percent. The brokerage house has given buy advice in the stock and the target has been kept at Rs 1310. In terms of current price of Rs 1100, it can increase by 19 to 20 percent.