HCL Tech Up 3% After Q4 Results Beat Street Estimates; Should you Buy, Sell or Hold?

Last Updated: April 21, 2023, 1:49 PM IST

HCL Technologies (HCL Tech) share price jumped 2.79 per cent to Rs 1,066.45 today after the IT company saw no negative surprises. The shares were trading 1.91 per cent higher at Rs 1,057.35 on NSE at 9:20 am.

In Q4 FY23, the company’s net profit jumped 11 per cent on-year to Rs 3,983 crore, surpassing analyst estimates against Rs 3,593 crore in the same quarter last year. The revenue came in at Rs 26,606, up 18 per cent from Rs 22,597 crore during the same quarter in the previous year. The record date has been fixed as April 28, 2023, for the payment of the interim dividend and the payment date has been set as May 9, 2023. The IT major also declared an interim dividend of Rs 18 per share, taking the total dividend for the financial year 2023-24 to Rs 48 per share.

Should you buy, hold or sell HCL Tech shares?

Jefferies said HCL Tech’s dollar revenues at $3.2 billion, which were down 1.2 per cent in constant currency terms, were in line with estimates and at the lower end of HCL Tech’s guidance range. EBIT margins at 18.2 per cent were down 140 bps sequentially and missed estimates due to higher direct and SG&A costs. However, profit at Rs 3,980 crore was ahead of estimates due to higher than expected other income.

“Deal wins were down 8 per cent YoY to $2.1 billion but the management guidance of 6-8 per cent growth in FY24 is relatively healthy. Margin guidance of 18-19 per cent in FY24 versus FY23 margins of 18.2 per cent suggests limited margin improvement in FY24. Dividend payout at Rs 48/share remains strong,” Jefferies said while suggesting a target of Rs 1,050 on the stock.

Like Jefferies, Nomura India does not see much upside for the stock. This brokerage has lowered its FY24-25F EPS estimates for HCL Tech by 4 per cent, driven by expectations of lower revenue and margin and higher tax rates. Nomura has a target of Rs 1,100 on the stock against Rs 1,150 earlier.

“We maintain our revenue estimates (6.3 per cent in revenue growth in c/c) and EPS estimates, with a revised FV of Rs1,225 (Rs1,235 earlier). A more balanced portfolio mix with momentum in apps and decent positioning in vendor consolidation and cost take-out mandates can offset vulnerability in ERD and products portfolios, and can drive peer-matching growth,” said analysts at Kotak Securities.

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