HCL Tech Rises After Q2 Results Declares Interim Dividend Of ₹12/ Equity Share

HCL Technologies announced its financial results for the July-September quarter of fiscal year 2023-24 on October 12, showing an increase in its consolidated net profit by 9.8% compared to the previous year, reaching ₹3,832 crore. The company's revenue from operations for the same quarter reached ₹26,672 crore, reflecting an 8.04% growth year-on-year.

Segment Performance

HCL Tech's IT and business services revenue increased by 4.6% year-on-year, reaching ₹19,898 crore. Engineering and R&D services revenue saw a 2% growth year-on-year, reaching ₹4,271 crore, and HCL Software revenue increased by 3.6% year-on-year. EBIT margin for IT and business services stood at 18.1%, while engineering and R&D services reported an EBIT margin of 19.2% for Q2FY24.

Dividend and FY24 Revenue Guidance

HCL Tech declared an interim dividend of ₹12 per equity share for fiscal year 2023-24, with a record date of October 20, 2023, and a payment date of October 31, 2023. The company adjusted its revenue guidance for fiscal year 2023-24 to 4-5% from the previous 6-7% and its services revenue guidance to 4.5-5.5% in constant currency terms. The EBIT margin is expected to be between 18-19%, according to the company's financial statement.

Deal Wins and Attrition

HCL Tech reported new deal wins in the September quarter, amounting to US$3,936 million, with 16 large deals, including 10 in the services segment and six in the software segment. The company also achieved a lower attrition rate of 14.2% in Q2FY24, down from 16.3% in the preceding quarter.

Outlook

As per the analyst, IT companies have struggled to achieve double-digit growth for several years. However, he suggests that large-cap companies offer valuation comfort compared to small and mid-cap firms. Also point out that while macroeconomic challenges persist, strong deal wins and a robust order book indicate strong growth prospects for fiscal year 2024-25. Major IT firms like Tata Consultancy Services and Infosys have also reported mixed results and guidance.

Market Response & Analyst Ratings

After Q2FY24 results announcement, HCL Technologies' shares currently trading 2.41% higher at ₹1,253.20 apiece on the BSE at 2.21 pm. Analysts from JPMorgan, BofA, and UBS have provided various ratings and target prices for HCL Tech shares, reflecting their views on the company's performance. JPMorgan is still not very optimistic about the stock and has a target price of ₹1,070. BofA has a more neutral view on HCL stocks and increased the target price to ₹1,230, up from the previous ₹1,170. UBS has raised the target price to ₹1,350 from ₹1,320 but also maintains a neutral rating for the share.

HDFC Securities, expects revenue growth for TCS to rebound to around 6.5% and for Infosys to reach 5.5-6.5% during fiscal year 2024-25. Also mentions they have slightly adjusted earnings per share estimates for the three IT companies in the near term but maintain an "ADD" rating on all three companies. HCL Technologies is seen as slightly better placed for the second half of fiscal year 2023-24 due to its strong growth outlook.

In summary, HCL Technologies reported good Q2FY24 results, with a rise in net profit and revenue growth, despite challenges in the IT sector. The company adjusted its guidance for the fiscal year but maintains optimism for future growth based on strong deal wins and a solid order book.