HCL Tech reported its first quarter results below the Street expectations. The Rupee revenue at Rs 26,296 crore is lower than the CNBC-TV18 poll of Rs 26,960 crore, while the Earnings Before Interest and Tax (EBIT) margin at 16.9 percent is lower than CNBC-TV18 poll of 17.9 percent. The net profits as well are below the estimates.
However, even after reporting weak results, the company has kept the FY24 guidance unchanged. Constant currency revenue guidance is maintained at 6 to 8 percent, while EBIT margin guidance is 18 to 19 percent.
The Street has a mix view on the stock. Bernstein has assigned a target price of Rs 1,000 and believes the FY24 guidance is at risk due to a different macro environment and higher exposure to ER&D.
Nomura has a 'neutral' rating on this stock with Rs 1,090 as the target price. It expects the IT services company to face challenges in achieving the top end of FY24 guidance. However, it expects FY24 EBIT margins to improve to 18.3 percent, 10 bps higher year on year. It adds that the drop in discretionary demand is starting to hurt. Jefferies has a 'hold' rating on the stock with Rs 1,205 as target price.
JP Morgan has assigned an 'underweight' rating with Rs 900 as target price as the first quarter results were a miss on estimates across all parameters. HCL Tech was negatively surprised by discretionary tech spends cuts driving project ramp downs especially in telecom and hitech verticals, while some projects did not see the ramp-ups as expected.
Macquarie, though has a contrary view with an 'outperform' rating and target price at Rs 1,520. It said the company's smaller verticals like Technology and Telecom saw a sharp decline quarter on quarter, however, the larger verticals like Financial Services and Manufacturing witnessed good growth of 5.1 percent and 3.6 percent respectively.
Prior to declaring results on July 12, the stock closed the trading session of the day at Rs 1,106, falling less than 1 percent. The Nifty IT index as closed 0.7 percent lower on same day.
The stock falls on July 13 in reaction to its first quarter results. At Rs 1,093, the the shares are trading 1.5 percent lower at 9:30 am.
First Published: Jul 13, 2023 9:09 AM IST
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