HCL Tech dips post Q2 results; mixed brokerage commentary weighs

The company’s consolidated revenue surged 44 percent YoY to Rs 20,655 crore during the reporting quarter, with HCL Technologies winning 14 large deals across its telecom, life sciences and healthcare, and manufacturing verticals.

The EBITDA margin for the reporting quarter stood at 23.4 percent.

In dollar terms, revenue came in at $2.8 billion, up 3 percent from the previous quarter.

The net employee addition hit an all-time high of 11,135 in the September quarter. The total headcount now stands at 187,634.

Commentary from brokerages was mixed with some raising their earnings per share (EPS) estimate for the company and some trimming their estimates to factor in lower-than-expected revenue and margin.

Lower-than-expected revenue growth compared to industry and recent run up in share price has prompted IDBI Capital Markets & Securities to maintain ‘hold’ rating on the technology company’s stock.

HCL Tech to include restricted stock units in compensation mix to retain high performers

Macquarie has lowered its FY22-24 EPS estimates by 2-6 percent following the miss at revenue and margin levels, but quickly added that strong deal wins and increase in payout ratio are key positives.

BOB Capital Markets has also slashed EPS estimates but has retained its ‘buy’ call on the stock due to the robust demand climate and strong traction in IT and business services driven by cloud services and digital transformation.

Similarly, JP Morgan has an ‘overweight’ stance on the stock but has cut its sales, margin and EPS estimates.

Meanwhile, Citi has downgraded the stock’s rating to ‘neutral’ from ‘buy’ and said that volatility in product and platform business performance takes the company one step back.

CLSA has also downgraded its rating to ‘outperform’ from ‘buy’ and added that the disappointment after stock’s recent rally could limit near-term returns.

Besides, the company announced an interim dividend of Rs 10 per share for the fiscal year 2021-22 (FY22).

The company has kept its margin guidance largely unchanged, analysts said. HCL Technologies has guided for its revenue to grow in double digits in constant currency for FY22 with an expectation that earnings before interest and tax margin will be between 19 percent and 21 percent for FY22.