HCL Tech dips 3% post-Q4 results; Here's what brokerages have to say

HCL profit falls by 26%, others among big four IT companies report profit

HCL Technologies reported 4QFY21 revenue and margin slightly below estimates. However, strong deal wins and a ‘highest-ever’ pipeline give comfort on the medium-term outlook. Similarly, while the guided FY22 Ebit margin band is wider than usual, management attributed it to non-recurring investments, implying a potential margin uptrend in FY23.

Increased dividend payout is an additional positive. Thus, while 4Q21 results may be optically underwhelming, we believe improved revenue growth visibility and relatively inexpensive valuations make risk-reward attractive.

CLSA maintains a buy rating on the stock and cut the target price to Rs 1,150 per share from Rs 1,220 earlier. Lower margin/higher tax rate assumptions drive 3 percent/2 percent cuts to our FY22/FY23 EPS forecasts, CLSA said.

JPMorgan maintained its overweight rating with a target price of Rs 1,190 per share, but it cut the FY22-23 EPS estimate by 4-5 percent led by margin moderation.

The brokerage remains positive on the company due to long-term growth durability. The success in applications, digital services and deal wins will aid the growth, it said.

The company remains a key GARP play on IT spend recovery, it added.

Goldman Sachs cut the FY22-23 EPS estimates by up to 5 percent and sees potential downside risk to street EPS estimates. It maintained a neutral call with a target price of Rs 975 per share.

P&P business has lower organic growth potential, while engineering business will also see a gradual revival, it said.

HSBC has a buy rating with a target price of Rs 1,230 per share. Q4 was a tad light on expectations, but deal wins were strong, it said.

The pipeline is robust for IT services. Products business seemed to have hit a bump and may worry the market again. The FY22 guidance is broadly in line, though not a positive surprise, HSBC said.

Macquarie said that the company's Q4 missed consensus estimates at both revenue and margin levels. The strong positive from Q4 is the robust deal bookings, it added.

Macquarie trimmed FY22-23 EPS estimates and target by 2 percent. It maintained an outperform call with a target price of Rs 1,250 per share.

At 10:50 am, the shares of HCL Technologies traded 2.58 percent lower at Rs 931.10 apiece on the BSE.