33 HCLTECH share price target reports by brokerages below. See what is analyst's view on HCLTECH share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
Maintain Buy with revised PT of Rs. 670: We have fine-tuned our earnings estimates for FY2020E/FY2021E, to factor in healthy nine month performance and upward revision in guidance by the management for FY2020. We have also introduced FY2022E estimates in this report. A strong deal pipeline along with large addressable opportunity in IMS provides the visibility of industry-leading organic revenue growth among large peers in FY2020E. At CMP, the stock trades at 14x/13x of its FY2021E/FY2022E earnings, which look attractive considering better revenue growth versus large peers over FY2019-FY2022E. We maintain our Buy rating on the stock with a revised PT of Rs. 670.
Historically, multiples of HCLT have shown strong correlation with its organic growth. However, this correlation appears to be broken in the recent cycle as concerns around Mode-3 acquisitions have overshadowed the improvement in organic growth. As these concerns recede and HCLT outperforms Tier I on organic growth, we expect a slight re-rating to 14x. We derive a target price of INR720 by discounting cash flows of Mode-1 + Mode-2 at a WACC of 12%. To reflect the higher risk associated with Mode- 3, we discount its cash flows at a WACC of 15%. Our pessimistic outlook on growth and margins of Mode-3 is adequately captured in our conservative.
HCL Tech reported a healthy quarter from the perspective of margin expansion and organic growth guidance. We expect the company to continue to report healthy growth in organic revenues in coming quarters. Further, we expect Mode-2 to improve in subsequent quarters. Additionally, easing of seasonality pressure in the products & platforms business within IBM driven by renewals would ensure growth. Further, we expect margins to improve gradually in FY19-22E. This coupled with reasonable valuation of 12x, prompt us to upgrade the stock to BUY recommendation with a target price of | 700/share (~14x FY22E EPS).
We maintain BUY on HCL Tech (HCLT) following a better than expected rev/margin performance (P&P led) and ~2% increase in EPS. Traction in P&P business is encouraging and strong pipeline to support organic growth. Our TP of Rs 665, implies 14x Dec-21E EPS.Despite the organic growth moderation in FY21E as compared to FY20E in the absence of mega deals, HCLT’s growth leadership is intact supported by (1) Strongest- ever deal pipeline and improvement in conversions, (2) Enhanced services/product bouquet with large cross-sell opportunities. Superior operating profile and cross-sell synergies, make up to some extent for the capital intensity and longevity concerns of the product business. Expect USD rev/EPS CAGR at 12/9% over FY19-22E.
HCLT won 12 transformational deals in quarter and suggested that order booking was soft during the quarter due to furloughs. But strong deal pipeline of CY19E gives them comfort of delivering industry leading organic growth led by growth across multiple service lines (IMS, Applications & BPO). We have increased our multiple for HCLT from 14X to 15X as we continue to witness steady organic revenue momentum (last 3 quarter) & quality of earnings is also improving (OCF/PAT and FCF/EBITDA for M9FY20 was 109% and 61% with FCF for Q3FY20 at USD 657 mn). We increase our EPS estimates led by lower tax rate & marginally increase of EBIT margin estimates. We now value HCLT at 15X earnings multiple on Sep-21 to arrive at changed TP of Rs. 691 (earlier Rs. 628). Valuations are still inexpensive at just 13.6X/12.5X FY21E/22E multiple. Maintain BUY.
We derive a target price of INR700 (+22% upside) by discounting cash flows of Mode-1 + Mode-2 at a WACC of 12%. To reflect the higher risk associated with Mode-3, we discount its cash flows at a WACC of 15%. Our pessimistic outlook on growth and margins of Mode-3 is adequately captured in our conservative estimates for this segment. In our base case, Mode-3 contributes < 10% of our overall fair valuation of the stock. We upgrade HCLT to Buy.
We reiterate our Accumulate rating on HCLT with a September 2021E target price (TP) of Rs1153. We value HCLT at a target P/E of 13.2x1HFY22E EPS, which is at a 20% discount to the target P/E multiple of TCS. Just to put this in context, our target P/E on Infosys is at a 10% discount to TCS’. The current discount is justified as TCS will likely grow organically at about the same pace as HCLT in the medium term but has more diversified revenue streams and capabilities. TCS will also have a better RoIC over the forecasted period. HCLT will suffer from the return-dilutive (at least in the initial phase) but margin-accretive IP acquisitions.
Valuation – Maintain Buy with revised PT of Rs. 1,275: We have fine-tunedour earnings estimates for FY2020E/FY2021E, factoring in an increase in revenue growth guidance, while we have already considered higher amortisation expenses in our model. Good deal wins during the quarter along with large addressable opportunity in IMS provides the visibility of industry- leading organic revenue among large peers in FY2020E. At CMP, the stock trades at 15x/13x its FY2020/FY2021 earnings estimates, which look attractive considering better revenue growth versus peers over FY2019-FY2021E. We maintain our Buy rating on the stock with a revised PT of Rs. 1,275.
We attended Investor day hosted by HCL Technologies (HCLT) in Mumbai & interacted with senior management regarding their strategy & business update. We were impressed with strong growth in digital at 30% CAGR in last 3 years with robust growth to continue ahead on the back of strong deal wins. HCLT has built a special team of ~650 people organically for digital consulting practice & have invested in innovation labs, partner ecosystem & reskilling of talent. HCLT management also laid out the rationale behind acquisition of IBM products which street was worried being old & eventually may become obsolete. They mentioned that mature software products offer significant untapped market potential & a large installed client base by itself has considerable value due to the sticky nature of client relationships. Management has clarified that it does not have plans for further acquisitions in products’ business until stabilization of existing portfolio of products, we believe this will soften concerns of some investors. We continue to find HCLT valuation inexpensive in context of strong growth outlook coupled with margin performance & clarity of stable performance in product business. HCLT remains our top pick in IT services pack.
Strong operating performance, upward revision in guidance, robust outlook and confident commentary reinforces our preferred pick view on the stock. We largely retain our operating estimates for the business and retain our ACCUMULATE rating on the stock with revised TP of Rs1,285 valued at 15x PER on FY21E earnings (higher multiple justified given superior financial performance).
This largely stems from the dim view that it has taken on the US$3.1bn bet HCLT has placed on developing an enterprise product business. We have been a bit more constructive on that part of the business vis-à-vis consensus (A Low-cost Call Option). Should it make a success of this effort we believe the multiple expansion could be significant. While considerable progress seems to have been made through the creation of HCL Software business as a separate entity, it is too early to call it a success. Post 2QFY20 results, we reiterate our Accumulate rating on HCLT with a September 2021E target price (TP) of Rs1153. Our estimates for FY20/FY21/FY22 remain the same. We value HCLT at a target P/E of 13.2x 1HFY22E EPS, which is at a 20% discount to the target P/E multiple of TCS. Just to put this in context, our target P/E on Infosys is at a 10% discount to TCS’. The current discount is justified as TCS will likely grow organically faster in the medium term because of its more diversified revenue streams and capabilities. TCS will also have a better RoIC over the forecasted period. HCLT will suffer from the return-dilutive (at least in the initial phase) but margin- accretive IP acquisitions.
HCL Tech has completed the acquisition of 7 products from IBM out of which 5 products were earlier under IP partnership and 2 products are new. Company has already paid $810 mn on June 30, 2019, and will likely pay $ 813 mn after one year. The deal also has an earnout component of $150 mn to be paid in three installments. This partnership will lead to goodwill of $ 920 mn and intangible asset of $1,250 mn adding to amortization. IBM product portfolio has EBITDA margin of 50%+ with amortization of ~20%, yielding EBIT margin of ~30%. The product & platforms business contributed around $108 mn to the top line in Q2FY20 and also likely to increase further in forthcoming quarters. We re-iterate a BUY with a target price of Rs. 1,272
HCL’s IBM IP acquisition revenue and continued organic growth momentum means its revenue growth is firing on two cylinders. While the amortisation treatment of the IPs remains an overhang, HCL is firmly on the path to an excellent FY20 in our view. The stock’s current valuation of 13.4x FY20E EPS also implies limited downside and a favourable risk-reward. Maintain ‘BUY/SP’ with a TP of INR1,416 (16x Q4FY21E EPS).
We maintain BUY on HCL Tech (HCLT) following a margin beat/rev guidance increase and unchanged est. Organic business momentum continues to be strong and IBM integration on track (key monitorable). Our TP is Rs 1,250, at 14x Sep-21E EPS and it is our preferred pick in tier-1 IT.
HCL Tech reported a healthy quarter from the perspective of margin expansion, deal signings and organic growth guidance. However, taking into consideration the company’s quality of revenue growth, acquisition led strategy and lower dividend yield in near term (owing to recent IBM deal), we maintain our HOLD rating with a revised target price of Rs 1200/share (~14x FY21E EPS).
We fine tune our estimates & incorporate FY22E estimates & now value HCLT based on Sep-21 earnings of Rs.90 valuing at 14x multiple & arriving at a changed target price of Rs. 1258(earlier: Rs. 1210). Stock is currently trading at 12.7x FY21E EPS and 11.8x FY22E EPS. HCLT remains our top pick in overall IT coverage universe.
Maintain Buy: HCL Tech is expected to deliver strong organic growth among large peers in FY2020E, led by robust organic growth (14% y-o-y CC) in Q1FY2020, large addressable opportunity in IMS, and strong growth in the ERS business. Further, investments in digital technology would help the company build digital competencies, which would provide a sustainable growth momentum going forward. However, we believe aggressive capital allocation towards the product business remains a risk to its business model and the integration of recent acquisitions remain a primary focus area. At the CMP, the stock trades at 14x/13x its FY2020E/FY2021E earnings estimates, which look attractive and is at a discount to peers despite better revenue growth. We maintain our Buy rating on the stock with an unchanged PT of Rs. 1,250.
We believe HCLT now has broad-based, diversified business model with multiple engines firing simultaneously to deliver industry leading organic growth in FY20E. We believe a limited understanding of the financial impact of 7 software products acquired from IBM was one of the factors for HCLT underperformances over its peers in past, with the clarity of treatment & strong broad-based organic growth with sustained margin performance makes stock extremely attractive and worth an investment at inexpensive 12X FY21E earnings. We expect USD revenue CAGR of ~12.1% over FY19-21E with earnings CAGR of ~8.4%. we maintain our Buy rating (GARP - growth at reasonable price) valuing HCLT at 14X FY21E earnings (30% discount to Infosys, 60% discount to TCS target multiple) & arrive at a TP of Rs. 1210. Stock is currently trading at 13x FY20E EPS and 12X FY21E EPS. Our EPS estimates stands for FY20E/FY21E stands at Rs 77.2/ Rs 86.4.
While we are positive about revival in HCLT’s organic growth from a low of 5%to a guidance of around 7-9% on the back of large deals won in the recent past, delay in revival of IMS and ER&D businesses would be a drag. However, we believe impending pressure on margins and concerns on ability of the company to generate revenues from newly acquired IPs from IBM, would keep a check on the stock. Also, given the fact that it has outperformed broader IT index in the recent past, we recommend a “HOLD” on the stock with a target price of Rs.1243, anupside potential of 13%. We value HCLT at 1SD of 3-Yr historical average FY21EPE of 14.1x.
We have corrected our volume estimates for FY20 and now expect a revenue CAGR of 1%over FY19-21E (earlier 12%) and PAT CAGR of -6% FY19-21E (earlier 11%). We have also cut down our P/E multiple for AAL to 13XFY21E (5 year forward mean -1 STD is 12.4X) to arrive at a target price of Rs 931. We recommend a BUY rating and advise investors to BUY in a staggered manner for better entry price in current market volatility.
Healthy deal wins, higher growth in key business verticals will put HCL Tech on high growth trajectory. We assign 13.8x P/E multiple to its FY21E earnings of Rs. 89.5 per share which gives a target price of Rs. 1,235 per share, an upside of 15%.
Acceleration in revenue in FY20 is based on its strengths in implementation of hybrid cloud, its automation skillsets, IoT and core engineering capabilities to execute integrated full-stack deals. HCLT’s commentary seems cautiously optimistic and against the 2H driven growth indicated a quarter back, the company is not building in a strong 2H, a source of comfort. The big kicker in FY20 will be incremental IP-related revenue from the deal signed with IBM. Post 1QFY20 results, we reiterate our Accumulate rating on HCLT with a March 2020E target price (TP) of Rs1,127.
Organic growth to remain strong, maintain Buy: We havefine-tuned our earnings estimates for FY2020E/FY2021E, factoring in miss in operating profitability and higher tax provision. Ramp-up of largedeals won earlier and healthy deal pipeline along with large addressable opportunity in IMS provides visibility of acceleration in organic revenue in FY2020E. However, we also acknowledge aggressive capital allocation towards the product business remains a risk to the company’s business model. At the CMP, the stock trades at 13x/12x its FY2020/FY2021 earnings estimates, which look attractive considering better revenue growth versus peers over FY2019-FY2021E. We maintain our Buy rating on the stock with an unchanged PT of Rs. 1,250.
We believe strong deal wins in earlier years coupled with healthy outlook for BFSI & IMS will help HCLT to achieve higher end of organic guidance. We believe HCLT is focusing on broad-based growth (e.g megadeal in BPO segment, investing in digital competencies) will reduced its dependence on IMS growth. We believe management is conservative on revenue guidance on account of weak & volatile external environment & have enough cushion to meet any potential slowdown in spending. HCLT has the potential to achieve the industry leading organic growth in FY20E. HCLT is trading at inexpensive valuations of ~11.8x FY21E valuations, we maintain our Buy rating (GARP- growth at reasonable price) valuing HCLT at 14X FY21E earnings (30% discount to Infosys, 60% discount to TCS target multiple) & arrive at a changed TP of Rs. 1210. Stock is currently trading at 13.2x FY20E EPS and 11.8x FY21E EPS.
Near-term 1QFY20 performance will remain subdued as mentioned above, while the company takes on further balance sheet risk in an attempt to boost growth. At this point, valuation support remains the only positive aspect for the stock. We maintain our BUY rating on HCLT with a revised TP of Rs1,280 (Rs1,195) as we roll over to FY21, even as we expect the stock to move southward in the near-term given the above- mentioned issues.
GSPL’s transmission business is expected to report stable volumes, adjusting for lower Reliance volumes, in the backdrop of growth in CGD & PNG sectors and increased LNG capacity in Gujarat. The upward revision of transmission tariffs by PNGRB is a positive for the stock and will lead to decent profitability, going forward. However, nearly 50% of GSPL value is derived from its listed CGD entity Gujarat Gas (54.1% stake) and unlisted Sabarmati Gas, which commands holding company discount. Hence, investors can directly invest in Gujarat Gas instead of GSPL. We value GSPL on an SOTP basis with investments at ~| 91 per share and standalone business at ~| 89 per share to arrive at a target price of | 180 with HOLD recommendation.
HCLT reports strong revenue & PAT in Q4FY19; however, margins missed estimates. The management guided for revenue growth at 14%-16% in CC terms for FY20 which translates to 13.4%-15.4% in USD terms. HCLT reported revenue growth of 11.8% (CC terms) in FY19 which exceeded its upper end guidance. We estimate a USD revenue growth of 13.7%/10.3% in FY20E/FY21E, driven by healthy growth in digital services. Healthy USD revenue growth offsets the negative impact on account of change in our assumption of USD/INR to ` 70 for FY20E/FY21E (vs ` 74/76 for FY20E/FY21E earlier).
Organic growth to accelerate, upgrade to Buy: We have fine-tuned our earnings estimates for FY2020E/FY2021E factoring in incremental revenue contribution from the acquisitions, while lowering the operating margins owing to cut in guidance and constraints around talent supply. Strong large deal momentum and pipeline along with large addressable opportunity in IMS provides strong visibility of acceleration of organic revenues in FY2020E. Further, the revenue contribution from products business could help in improving margins once it stabilised. At CMP, the stock trades at 14x/13x of its FY2020/ FY2021E earnings estimates, looks inexpensive valuation considering impressive revenue growth over FY2019-FY2021E. Therefore, we upgrade our rating to Buy on HCL Tech with a revised PT of Rs. 1,250
We believe strong deal wins in FY19(~78 transformational deals) coupled with healthy outlook for BFSI & IMS will help HCLT to achieve higher end of organic guidance. We include IBM acquisition of IBM in our estimates resulting ~5% rise in our revenue estimates, excluding inorganic component our projections remain the same. We believe HCLT is focusing on broad-based growth (e.g megadeal in BPO segment, investing in digital competencies) will reduced its dependence on IMS growth. HCLT is trading at inexpensive valuations of ~13x FY21E valuations, We maintain our Buy rating (risk-reward ratio favorable) valuing HCLT at 14X FY21E earnings (30% discount to Infosys, 60% discount to TCS target multiple) & arrive at TP of Rs. 1186.
The acquisition of IBM products implies structural change. Its well-established infrastructure management practice, combined with its Enterprise application services (EAS) practice, provides significant cross-selling opportunity, which could help HCLT win some of the large size deals. Digital and IoT an are key focus areas for clients, and the company expects them to grow at a much faster clip. At CMP of INR 1137, the company is trading at P/E multiple of 11x FY21E EPS. We value the company using P.E. multiple methodology. We have given an exit multiple of 12x to arrive at a target price of INR 1250 which is an upside of 10%.
We maintain BUY on HCL Tech following a slight beat in 4Q. Strong (inline) guidance offset by margin cut. Our TP is Rs 1,250, valued at 14x FY21E EPS. HCLT’s recovery in organic growth trajectory (converging with larger peers TCS/INFY) is impressive. With continuity in strong deal wins (78 transformational wins in FY19) and focus on integrated deals across Apps/IMS/ERS (40% of pipeline), the growth trajectory looks sustainable. Expect USD/rev CAGR of 14/9% CAGR over FY19-21. Favourable risk-reward with valuations at 12.8x FY21E (lowest in tier- 1 IT trading at >20% discount to Wipro). Key risks include adverse visa regulation, escalating macro headwinds (trade war) and integration of product portfolio.
Our recent interaction with management of HCL Technologies (HCLT) reinforces our conviction in its long-term prospects. Key highlights: 1) HCLT is on track to meet its FY19 guidance of 9.5–11.5% growth for revenue and 19.5–20.5% for EBIT margin. 2) Management does not expect any major macro headwinds while the demand environment remains robust. 3) With cost pressure largely behind, the risk to margin dilution remains minimal. We believe HCLT is well positioned to win large-scale transformation deals owing to its expertise in the IMS and ER&D segments, and partnerships with top global technology players. The stock is attractively valued at 12.3x FY20E EPS. Maintain ‘BUY/SP’. Key takeaways of our interaction follow.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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