HCL Technologies - Q2FY21 Result Update - ICICI Securities

HCL Technologies (HCL) reported a healthy set of Q2FY21 numbers and revised its margin guidance upwards from 19.5-20.5% to 20.0-21.0%. Revenues were above our estimate at 4.5% QoQ in CC terms, while margins were broadly in line with our estimates. HCL has signed 15 transformational deals, led by key industry verticals including life sciences and healthcare, public services (energy & utilities) and manufacturing. The company has declared a dividend of Rs. 4/share.

Valuation & Outlook

One of the key positives is that the company is planning to increase its dividend to Rs. 4/share per quarter from Rs. 2/share per quarter. We believe this can be a stepping stone and the company could further increase payout to 50% of PAT (from current ~30%) considering the healthy free cash flow the company has started to generate. One of the key overhangs in the stock was capital allocation and increased payout could lead to a re-rating of the stock. Further, considering opportunities in cloud consumption, cyber security, automation, app modernisation, we remain optimistic on HCL Tech's revenue trajectory. This, coupled with improving margin trajectory, prompt us to upgrade the stock from HOLD to BUY with a revised target price of Rs. 960/share (16x FY23E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_HCLTech_Q2FY21.pdf

Shares of HCL TECHNOLOGIES LTD. was last trading in BSE at Rs.827.1 as compared to the previous close of Rs. 859.45. The total number of shares traded during the day was 723337 in over 21298 trades.

The stock hit an intraday high of Rs. 877 and intraday low of 821. The net turnover during the day was Rs. 604908554.

Source : Equity Bulls

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