Motilal Oswal: HCL Tech Q1 Margin Beat; Encouraging Guidance
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Motilal Oswal Report
HCL Technologies reported Ebitda margin expansion over 20 basis point QoQ despite the Covid-19 disruption, which is impressive. Notably, it had reported margin expansion even in Q4 FY20, when most other large companies had witnessed contraction. A decent increase in net new deal wins and a robust deal pipeline over 40% QoQ comfort us. HCLT surprised us by reinstating revenue growth over 1.5–2.5% Compounded Quarterly Growth Rate, Constant Currency) and Ebit margin guidance (19.5–20.5%). Besides bringing back performance visibility, it further hinted that the worst was behind.
Revenue decline was in-line with estimates. As expected, Engineering Services -9% QoQ, CC was the biggest overhang on revenue this quarter. While the IT and Business Services segment declined approximately 8% QoQ (CC), the Products and Platforms business remained resilient (-2% QoQ, CC).
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