Sharekhan’s take on HCL Technologies
According to the brokerage “We expect a strong bounceback in growth in Q3FY2022 given strong deal wins, robust net headcount addition, anticipated good recovery in products & platforms business, client additions and broad-based demand. HCL Tech’s strong IMS capabilities, robust partnerships with hyperscalers and strengths in digital foundation and modern applications position the company to capitalise opportunities in cloud space. HCL Tech’s new payout ratio of at least 75% of net income over FY2022-2026 is positive. It provides comfort on efficient capital allocation ahead and will limit any large inorganic investments.”
The brokerage also claims that “We expect a strong bounceback in growth in Q3FY2022 given its strong deal wins, robust net headcount addition, anticipated good recovery in products & platforms business, client additions and broad-based demand. The company recruited around 35,549 employees on a net basis in the last four consecutive quarters, which increased 2x y-o-y over its revenue growth over the same period. Strong headcount addition and robust deal booking provide growth visibility in the coming quarters of FY2022.”
Buy HCL Technologies With A Target Price of Rs. 1,400
Sharekhan has said in its research report that “We believe the company’s strong digital capabilities, new geography expansion, solid competencies to capture opportunities in cloud space, aggressive net employee additions and broad-based demand would help HCL Tech to accelerate its growth in FY2023 and minimize the gap in growth with large peers in subsequent years. HCL Tech is likely to sustain its margin performance on the back of revenue growth, pyramid management, higher offshoring and expansion into low-cost smaller cities.”
The brokerage also claims that “The stock price has corrected by ~18% from the peak over last three months due to revenue miss in Q2FY2022. At CMP, the stock trades at a reasonable valuation of 19x/17x its FY2023E/FY2024E earnings, at a sharp discount to large peers. HCL Tech’s new payout ratio of at least 75% of net income over FY2022-2026 is positive as it is likely to abate investors’ concerns relating to its capital allocation strategies toward large acquisitions. Hence, we maintain a Buy on the stock with an unchanged PT of Rs. 1,400.”
The stock has been picked from the brokerage report of Sharekhan Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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