BUY
CMP: Rs1099
Target Price: Rs1400
* HCLT delivered broadly in line operating performance in Q4. Revenue grew 0.5% QoQ to USD2.99bn (1.1% CC) on the back of continued traction in Services (5% CC). Products & Platforms declined 24% CC due to seasonality. EBITM declined by 110bps to 17.9%.
* It signed 6 large services and 4 product deals across technology & services, life sciences & healthcare and public services verticals for a total new deal TCV of USD2.3bn (6% QoQ). Broad-based demand, robust deal intake and pipeline augur well for revenue acceleration.
* HCLT has guided for revenue growth of 12-14% CC in FY23 on the back of continued traction in the services business, healthy deal intake and deal pipeline (close to all time high). It has guided for 18-20% EBITM guidance for FY23, considering supply-side challenges and planned investments in Mode 2 capabilities and markets.
* We cut FY23/FY24 EPS estimates by 3%/2.7%, factoring in Q4 performance and FY23 guidance. Revenue growth momentum is encouraging; however, pressure on Services margin led to earnings cut. We maintain Buy with a TP of Rs1,400 at 22x Mar'24E EPS considering attractive valuations, steady cash generation and ~4% dividend yield.
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