Target Price: Rs1380
■ HCLT's operating performance missed expectations in Q2FY22, largely attributed to the decline in Products & Platform business (-8% QoQ CC). Revenue grew 3.5% QoQ in CC terms, below our estimates. EBITM declined 60bps QoQ to 19.0%, missed expectations.
■ It signed 13 large services and 1 product deals across Life sciences and healthcare, telecom, and manufacturing, totaling new deal TCV of USD2.2bn (38% YoY). The strong demand environment and robust deal intake augur well for revenue acceleration.
■ The company reiterated double-digit revenue growth guidance in CC for FY22, implying at least a 2.2% CQGR over Q3-Q4. It also retained 19-21% EBITM guidance for FY22, considering planned investments in Mode 2 capabilities and in certain markets.
■ We lower our FY22E/23E/24E EPS by 3.3%/1.3%/0.8%, factoring in Q2 miss and higher payout. We maintain Buy with a TP of Rs1,380 at 23x Sept'23E EPS, considering attractive valuation (~3% dividend yield, double-digit earnings growth profile, >20% ROE) and anticipated revenue acceleration.