Research

HCL Technologies Ltd - Q4FY23 Result First Cut - A marginal miss on major parameters, though PAT beats expectations

Posted On : 2023-04-21 09:45:35( TIMEZONE : IST )

Mr Manish Chowdhury, Head of Research at Stoxbox.

# Revenue saw a marginal decline of 0.4% on a sequential basis while it grew 17.7% on a year-on-year basis in INR terms to Rs. 26,606 crores, missing market estimates of Rs. 26,856 crores marginally in Q4FY23.

# The company's biggest segment IT and business services grew 2.5% QoQ/18.4% YoY to Rs. 19,632 crores while its other two segments Engineering and R&D services, and HCL Software declined on a sequential basis by 3.4%/13.8% to Rs. 4,274 crores and Rs. 2,700 crores respectively but on a yearly basis grew by 15.4%/16.5% in Q4FY23.

# EBIT declined 7.5% QoQ (up 18.8% YoY) to Rs. 4,836 crores, while EBIT margin stood at 18.2% (down 140 bps QoQ /up 17 bps YoY), below market expectations of Rs. 4,966 crores in Q4FY23.

# Net income stood at Rs. 3,981 crores (down 2.8% QoQ /up 10.6% YoY), while PAT margin came in at 15.0% (down 37 bps QoQ/ down 96 bps YoY), higher than market estimates of 14.5% in Q4FY23.

# LTM attrition stood at 19.5% in Q4FY23 compared to 21.7% in Q3FY23.

# TCV (new deal wins) stood at US$2,074 million for Q4FY23 (down 8.0% YoY) while TCV for FY23 grew 6.6% at US $8,853 million.

# The Board of Directors declared an interim dividend of Rs.18 per equity share.

# In its FY24 guidance, the company expects 6.0%-8.0% YoY revenue growth in CC terms while its services segment revenue growth is projected to be between 6.5% and 8.5% YoY in CC terms. Further, the EBIT margin is expected to be in the range of 18.0% and 19.0%.

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HCL Technologies reported a marginal miss on most of the parameters except net profit which was slightly above expectations. We feel that the tough operating environment had less of an adverse effect on its performance when compared to heavyweights like TCS and Infosys. On the global scale, the company's US market performance stood strong while the European markets registered a decline in growth on a sequential basis. The company's largest revenue-generating vertical Financial Services recorded double-digit growth in CC terms while the Manufacturing and Telecommunications vertical saw a decline in its growth on a sequential basis. As with major IT companies, HCL also reported a lower attrition rate, thus pointing to a better operational efficiency. However, considering a slower expected revenue growth in FY24 and deterioration in the demand environment, we would closely monitor whether the current challenges in the IT sector lead to a further downgrade to the guidance going forward.

Shares of HCL Technologies Limited was last trading in BSE at Rs. 1037.55 as compared to the previous close of Rs. 1038.00. The total number of shares traded during the day was 48683 in over 3315 trades.

The stock hit an intraday high of Rs. 1047.20 and intraday low of 1032.15. The net turnover during the day was Rs. 50644259.00.