Navratri Special pick by Religare Broking: HCL Tech could give nearly 50% return in next 1 year
Navratri is already here, and we know how important and auspicious the next nine days are, signifying festivities across India. Broking will share a fresh stock idea for the next nine days for long-term investors:
Day 1:
Target: Rs 1,333
LTP: Rs 906
Upside: 47%
HCL Technologies is a next-generation global technology company that helps enterprises reimagine their businesses for the digital age. The company offers an integrated portfolio of products and services through three business units such as IT and Business Services (ITBS), Engineering and R&D Services (ERS), and Products and Platforms (P&P).
In the last two years, HCL has further strengthened its service business (i.e. ITBS and ERS) services due to the constant demand for next-generation technologies across various industries.
Apart from their capabilities, HCL has partnerships with Amazon Web Services (AWS), IBM, Microsoft, Google (for cloud), Dell, CISCO, Adobe, etc. to provide solutions to clients in their digital journey.
The company earned 88 per cent revenue in FY22 from services and reported a CAGR growth of 10.6 per cent in FY20-22.
Going ahead, in the next two years, from FY22-24E, the service business segment is expected to grow at a CAGR of 15.2 per cent, and the growth will be driven by the company’s focus on enhancing its digital services, as the industry trend suggests that global players will continue spending higher on it.
This would bode well for players like HCL to win more deals on the back of expert knowledge, end-to-end digital offering, and investment in talent.
For FY23, management guided its revenue growth to be 12-14 per cent in constant currency while EBIT margin to be between 18-20 per cent. Meanwhile, their focus will be on managing attrition levels and employee costs.
On the financial front, we have estimated its revenue (INR term) and EBIT growth of 13.7 per cent and 15.1 per cent CAGR over FY22-24E. Further on the valuation front,
is trading at a comfortable valuation of 18x FY22 and 13.7x FY24E compared to large-cap peers.
Religare Broking continues to maintain a Buy rating with a target price of Rs 1,333 in the next 9-12 months.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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