HCL Technologies, the Indian IT giant, saw its shares climb by 3.5% on Friday after it posted Q2FY24 financial results that surpassed market expectations. The company reported a 10% growth in consolidated net profit for Q2FY24 at ₹3,832 crore ($518 million) and an 8% increase in operational revenue to ₹26,672 crore ($3.6 billion).
Despite these strong results, HCL Tech followed in the footsteps of its rival Infosys (NS:INFY) by lowering its revenue outlook for FY24 from 6-8% to 5-6%, leading to some analyst concerns. Nevertheless, the company maintained its EBIT margin forecast at 18-19%.
Brokerages such as UBS, Kotak Institutional Equities, Motilal Oswal, Nuvama, and Choice Broking expressed a positive outlook on HCL Tech's stock. However, JP Morgan rated the stock as 'Underweight'.
A standout mega deal led to all-time high bookings for the company, which resulted in impressive cash conversion and margin expansion. The EBIT margin significantly exceeded forecasts. HCL Software's recovery reached 16%, with an expected FY26E EPS of ₹76.5.
The company's valuation was based on a 21x FY25E EPS multiple. It also made significant investments in digital capabilities. Management is guiding a 5-6% YoY cc growth for FY24E, with a focus on return on invested capital (ROIC) improvement.
However, due to slightly missed revenue growth, EPS estimates were lowered by 1.6% and 3.0%. Despite this adjustment, the overall performance of HCL Technologies in Q2FY24 demonstrates robust growth and resilience amidst market challenges.
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