Expert says that HCL Technologies shares should be bought with target of Rs 1145

HCL Tech share price today is Rs 1038, trading flat today. Ashis Biswas, Head of Technical Research at CapitalVia Global Research says that technically after consolidation over the last two months, the stock has posted a breakout in early Apr’2021 when it sustains above Rs 1000. He said that the target price on the stock is Rs 1145.

Ashis said that HCL Tech remains one of the most lucrative stocks, trading at discount to TCS / Infosys while delivering 20% earnings growth in FY21 YTD. In Q3FY21, revenue rose by 6.4 percent year on year to Rs 19302 cr (1.1% YoY, 3.5% QoQ on CC basis). Media and Telecom announced a significant sales increase due to a one-time contract operation (12.1% QoQ in CC terms). Manufacturing rebounded with a robust 5.6% yoy growth, while Tech Services rose 6.8% YoY (in CC terms). In FY22E, higher IMS exposure (over 30% of sales) coupled with strong demand for Cloud services could help drive revenue growth of over 14%.
 

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HDFC Securities says Key demand trends in IT Sector are:

(1)    large deal wins driven by accelerated modernisation/transformation agenda of enterprises
(2)    strong deal funnel despite large deal bookings
(3)    greater alignment of the industry with hyperscalers/SaaS majors
(4)    cloud migration (only 30-35% of the workload on the cloud)
(5)    better growth distribution across verticals (Manufacturing, ENU and Retail & CPG)
(6)    rising competitive advantage/gains of Indian IT in large deals

HDFC Securities said that industry experts highlighted the following key pointers for IT Sector:

(1)    demand environment improving further, larger vendors will continue to benefit from scale posing higher hurdle rate for mid-tiers
(2)    supply-side constraints are only in highly-skilled areas (attrition variance within the companies can increase)
(3)    lower services multiplier in SaaS as compared to on-premise but the overall opportunity provides a big ‘net’ opportunity
(4)    pandemic has increased the acceptance of global delivery model, with seamless progression into virtual framework of sales, knowledge transfer and execution
(5)    high efficiencies in captives on multiple parameters