Foreign brokerage Morgan Stanley said the strong revenue performance was dampened by a lack of positive revision in outlook. Weak margins in the services segment are driving limited EPS upgrades, it said while keeping a target of Rs 1,450 on the stock.
CLSA said an improved revenue growth visibility, a relatively attractive valuation — a 28 per cent discount to
and a 33 per cent discount to , and improved capital allocation keeps it engaged.
This brokerage said it said while suggesting that aggressive deal perusal is exacerbating the impact of supply-side pressures on near term margin trajectory, which it said could weigh on the stock’s near term performance. The brokerage has trimmed its target on the stock to Rs 1,450 from Rs 1,470 but believes the risk-reward is favourable for the stock.
HCL, which had hired 16,000 freshers in the first nine months of FY22, is hoping to hire 20-22,000 for the year. It is looking to increase this further by 50 per cent in FY23. It has indicated that it is likely to end FY22 towards the lower end of its guided margin band of 19-21 per cent as it expects supply-side challenges persisting for the company for a few quarters.
“In the medium term, selective price hikes and higher fresher hiring could help it improve margins, in our view. We are building 19 per cent EBIT margin in FY22 and 20 per cent in FY23-24,” said Nomura India.
Nomura said ‘s order pipeline is at an all-time high, and its participation rates in cloud transformation and application modernisation deals remain strong. It is pegging a 14-15.3 per cent YoY growth in dollar revenues in FY23-24. The brokerage set a target of Rs 1,580 for the stock.
The IT major reported a 13.6 per cent drop in Q3 profit at Rs 3,442 crore compared with Rs 3,969 crore in the corresponding quarter last year.
Revenue from operations rose 15.7 per cent year-on-year (YoY) to Rs 22,331 crore compared with Rs 19,302 crore in the same quarter a year ago.
Ebit margin was at 19 per cent, up 8.5 per cent QoQ and down 3.7 per cent YoY.
“HCL delivered remarkably strong revenue, strong growth and an equally disappointing margin. Outlook for IT services growth is positive as reflected in strong deal wins, headcount addition and healthy client metrics. We soften our margin stance, noting elevated investments and cost inflation,” said Kotak Institutional Equities while raising its fair value for the stock to Rs 1,500.
The stock fell 7 per cent to hit a low of Rs 1,244 on BSE.
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