HCL Tech Ltd. - Q3 FY23 Earning Highlights | Globe Capital
13-Jan-2023
HCL Tech Ltd. – Q3 FY23 Earning Highlights

The company reported a higher-than-expected profit for the December quarter helped by strong deal wins, but lowered its full-year revenue view citing seasonal challenges in the fourth quarter & EBIT margin guidance narrowed to 18.0% – 18.5%.  

Q3 FY23 Earning Overview and Verdict
CMP
Rs. 1060
Verdict
Beat the market estimates

Q3FY23 Earning Key Highlights:

  • The Company reported 19% year-on-year (YoY) growth in consolidated net profit to Rs 4,096 crore. The revenue for the quarter grew nearly 20% on year to Rs 26,700 crore. Sequentially, the revenue rose a sharp 8% and the profit by more than 17%.
  • In constant currency terms, revenue in the December quarter rose 5% sequentially and 13.1% YoY.
  • The operating profit at Rs 5,228 crore was at an all-time high.
  • EBIT Margin at 19.6%, up 165 bps QoQ.
  • Net Margin at 15.3%, up 117 bps QoQ.
  • Operating Cash Flow at 111% & Free Cash Flow at 99.6% of Net Income (LTM).
  • The Company won 17 large deals during the quarter, with new deal wins at $2.35 billion, up 10% YoY.
  • Interim dividend: The Company’s board has approved an interim dividend of ₹10 per equity share for FY23. The record date is set as 20 January, 2023. The payment for the said interim dividend shall be made on 1 February, 2023.
  • The fresher additions were also less at 5,892 compared to 10,339 a quarter ago. Net addition of 2,945 during the quarter, closing headcount: 222,270
  • During the quarter, the attrition rate dipped further to 21.7% on a 12-month trailing basis, from 23.8% in the September quarter.

Management Takeaways:

  • The management has further reduced its constant currency revenue growth guidance for the current financial year to 13.5-14.0% from 13.5-14.5% earlier. The company also lowered its operating margin guidance to 18.0-18.5% from 18-19% earlier.
  • The management is confident to deliver industry leading growth over the medium-term supercharged by its positioning, its strong propositions and its passionate people.
  • The management is committed to bringing together the best of technology and its people to supercharge progress for clients in their digital transformation journeys. And it continues to execute its strategy by aligning to the highest standards of governance and transparency.
  • The Company added 3 clients in the $50 million basket, two in the $20 million basket, and 9 in the $5 million basket during the quarter.
  • The top 5 clients contributed more than 10% to the overall revenues in the third quarter.

Valuation & View

At the CMP of Rs. 1060, the stock is trading at annualised P/E multiple of 21.12 times with the annualised EPS of Rs. 50.17, which is fairly valued.

Disclosure

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