Why Analysts Are Upbeat On HCL Technologies Despite Q1 Profit Missing Estimates

Most analysts remain bullish on HCL Technologies Ltd. even as margin of the software services provider contracted in the quarter ended June.

HCL Technologies’ operating margin fell to 16.7 percent in the June quarter from 18.6 percent in the quarter-ago as the rupee strengthened against the dollar and visa costs rose. Also, its profit missed the lowest analyst estimate during the quarter.

The Noida-based IT firm, however, expects to report higher deal revenue and margin from the September quarter.

A look at what analysts made of HCL Tech Q1 Results 2019-20:

CLSA

• Maintains ‘Buy’ with a target price of Rs 1,380 apiece.
• Margins miss, but FY20 guidance maintained.

Macquarie

• Maintains ‘Outperform’ and cuts target price to Rs 1,340 from Rs 1,380.
• Strong organic growth key positive surprise in first quarter.
• Cuts FY20/21 EPS estimates by 3-5.6 percent on higher taxes.

HSBC

• Maintains ‘Buy’ and hikes target price to Rs 1,250 from Rs 1,220.
• Front-end recognition of large deals leading to higher revenues.
• Normalised core business momentum is decent.
• Acquisition of IBM deals now fully integrated.

Phillip Capital

• Remains ‘Neutral’ and retains target price of Rs 1,080.
• Strong revenue performance but remains unattractive.
• Company will continue to chase inorganic growth.
• May not see large deal ramp-up in FY21.
• Expects underperformance in near to medium term.