HCL Technologies Ltd – Investment Ideas | Globe Capital
13-Jul-2022
HCL Technologies Ltd – Investment Ideas

The stock is trading at ttm P/E multiple of 18.9 times which is lower than the 10 years average P/E of 20.41 times.          

Attractive price level
CMP
Rs. 915
Verdict
BUY

HCL Technologies is a next-generation global technology company that helps enterprises reimagine their businesses for the digital age. Its technology products and services are built on four decades of innovation, with a world-renowned management philosophy, a strong culture of invention and risk-taking, and a relentless focus on customer relationships.

Through its worldwide network of R&D facilities and co-innovation labs, global delivery capabilities, and over 208,000+ ‘Ideapreneurs’ across 52 countries, HCL delivers holistic services across industry verticals to leading enterprises, including 250 of the Fortune 500 and 650 of the Global 2000.

Revenue Mix: HCL offers its services and products through three business units: IT and Business Services (ITBS) ~72.1%, Engineering and R&D Services (ERS) ~15.8% and Products & Platforms (P&P) ~12.1%.

Diversified customer base: HCL delivers holistic services in various industry verticals, categorized as Financial Services, Manufacturing, Technology & Services, Telecom & Media, Retail & CPG, Life Sciences & Healthcare and Public Services.

Debt Free Balance sheet: The Company is fully debt free. As of March 31, 2022, the company has cash reserve of more than Rs. 12600 cr.

Strong financial growth: Its sales growth is 16.96% & net profits growth is 20% of last 10 years.

Promoter/FII Holdings: Promoters held 60.72% stake in the company as of 31-Mar-2022, while FIIs owned 18.97%, DIIs 14.68%.

 

Q1FY23 Earning Key Highlights

  • Revenue for the quarter rose 16.92% YoY to Rs 23,464 crore compared with Rs 20,068 crore in the same quarter last year.
  • The Company reported a 2.4% year-on-year rise in consolidated net profit at Rs 3,283 crore in the June quarter compared with Rs 3,205 crore in the same quarter last year.
  • Ebitda margin stood at 21.2% against 22.4% in March and 25.2% in the June quarter of last year.
  • Ebit margin for the quarter came in at 17% compared with 18% in the March quarter and 19.6% in the year-ago quarter.
  • The Company has posted an EPS of Rs 12.13 as compared to Rs 11.81 last year.
  • New deal wins amounted to $2,054 million for the quarter, up 23.4% YoY. Out of this, Services’ total contract value (TCV) stood at $ 1,950 million, with included a net seven large deal wins. Products TCV stood at $ 104 million, which included nine net deal wins.
  • The Company has declared an interim dividend of 10/- per share.
  •  FY2023 Guidance – Revenue expected to grow between 12% to 14% in constant currency & EBIT margin expected to be between 18% to 20%.

Valuation & View: At  the CMP of Rs. 915, the stock is trading at ttm P/E multiple of 18.9 times which is lower than the 10 years average P/E of 20.41 times, which looks attractive for investment purposes with the target price of Rs 1250 within 12 to 18 months perspective.

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