HCL Tech Share Price Jumps 3% As Fourth Quarter Net Profit More Than Triples; should you buy, sell or hold?

HCL Technologies’ share price jumped nearly 3% to 1,135 rupees apiece on BSE in Friday’s trading, after the IT major posted 226% growth in its consolidated after-tax profit (PAT ) to Rs 3,593 crore in the fourth quarter. The company recorded a net profit of Rs 1,102 crore in the corresponding quarter of the previous year. HCL Technologies has also declared an interim dividend of Rs 18 per share of Rs 2 each with a record date of April 29, 2022. Said dividend will be paid on May 11, 2022. At least four research and brokerage firms are seeing up to 27 by upside potential of HCL Tech stock price.

Emkay Global Financial Services
Classification: buy; Objective: Rs 1,400; Up: 27.4%

HCL Tech achieved operating performance broadly in line in the fourth quarter. Widespread demand, a large number of transactions and a pipeline bode well for an acceleration in revenue. The computer science major guided 12-14% CC revenue growth in FY23 thanks to continued traction in the services sector, healthy deal count and deal pipeline. Emkay Global Financial Services has reduced its FY23/24 EPS estimates by 3%/2.7%, taking into account fourth quarter performance and FY23 guidance. Revenue growth momentum is encouraging ; however, service margin pressure led to lower earnings. It maintained its long with a TP of Rs1,400 at 22x March 24E EPS given attractive valuations, stable cash generation and a dividend yield of 4%.

Motilal Oswal Financial Services
Classification: buy; Target: 1,310; Up: 19%

Motilal Oswal Financial Services analysts said strong sequential growth within services, strong headcount growth, healthy deals and a strong pipeline point to an improving outlook. Given its deep capabilities in the IMS space and its strategic partnerships, cloud investments and digital capabilities, it expects HCL Tech to emerge stronger through an expected increase in demand from companies for these services. The stock trades at 18x ​​FY24E EPS, which provides a margin of safety.

Nirmal Bang
Classification: accumulate; Objective: Rs 1,247; Up: 13%

Nirmal Bang believes HCL Tech will see the negative impact of the stagflationary environment developing in the Western world, which could impact tech spending around 2HFY23 and affect its FY23 guidance. constant estimates, leading to a slight reduction in EPS estimates. However, he believes that HCL Tech is better positioned in the new demand environment due to its enormous skills in automation and IP.

Prabhudas Lilladher
Classification: accumulate; Objective: Rs 1,169; Up: 6.3%

Prabhudas Lilladher downgraded HCL Tech to hoard (earlier uy) as it cut DCF-based target price to Rs 1169 (earlier Rs. 1295) driven by lower margin profile as volatility in P&P earnings dampens growth overall revenue growth, increase in the risk-free rate, and moderation in the terminal growth rate. It cut EPS estimates by 4%/5% for FY23/24, driven by a reduction in EBIT margin estimates of around 50-70 basis points.

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