Result Analysis: HCL Technologies Limited (CMP: Rs.1048) Result Update: Q4FY23

HCL Technologies Limited is the leading IT solutions provider in India and across 54 countries globally. The company is engaged in providing a range of software development services, business process outsourcing services and information technology (IT) infrastructure services. The company helps enterprises to transform their businesses through digital technology transformation. The revenue segments of HCL Technologies include IT & business services, Engineering & R&D services and Products & Platforms.


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    Stock Details
    Market Cap. (Cr.) 284636.34
    Equity (Cr.) 542.73
    Face Value 2
    52 Wk. high/low 1157 / 876
    BSE Code 532281
    Book Value (Rs) 225.68
    Sector IT – Software


    Key Ratios
    Debt-equity: 0.11
    ROCE (%): 24.59
    ROE (%): 22.2
    EPS: 53.29
    P/BV: 4.3
    P/E: 19.47

    Result Highlights:

    • The company experienced a slight decrease in revenue of 0.4% QoQ to Rs.26,606 cr. and a 2.8% QoQ decline in net profit to Rs.3,981 cr. The primary factor contributing to this performance decline was the cuts in the discretionary spending and ramp downs & deferrals of projects.
    • EBIT Margin of the company also declined by 140 bps QoQ in the quarter and stands at 18.2%.
    • Among segments, Products & Platforms segment showed major growth decline of 14% QoQ basis. Engineering, R&D services also declined by 3% QoQ while IT & Business services grew by 3% QoQ in the quarter.
    • Across geographies, Europe and Rest of the world showed de-growth of 30 bps and 10 bps respectively on QoQ basis while America showed growth of 30 bps QoQ.
    • Company won 13 large deals in Q4FY23 compared to previous quarter of 17 deals. Total TCV of the company stands at $2.07 billion, down by 8% YoY.
    • In Q4, the attrition rate decreased from 21.7% in Q3FY23 to 19.5%. Additionally, the company hired 3,674 new employees, bringing the total headcount to 225,944.
    • HCL Tech announced an interim dividend of Rs.18 per share.

    Financial Performance:

    Shareholding Pattern:

    Particulars (In %) Q3FY23 Q3FY22
    Promoters Group 60.72 60.33
    FIIs 18.81 20.96
    DIIs 15.91 13.74
    Public 4.19 4.5
    Others 0.4 0.5

    Management Commentary:

    Commenting on the December quarter results, C Vijayakumar, CEO and MD said, our pipeline is near all-time high, which reflects our differentiated business mix and strong client demand for our offerings. We have added 3,674 employees this quarter and overall employee strength has now grown beyond 225000. All these set us well in FY24 for a healthy revenue growth in 6-8 percent range with operating margins in 18-19 percent range.


    HCL Technologies showed subdued performance in Q4FY23 with 0.4% QoQ decline in revenue and 2.8% QoQ decline in the net profits majorly due to delay in decision making related to discretionary spending. The company saw strong growth in BFSI segment on the back of large deals ramp up while telecom, manufacturing, and high-tech segments were stressed in the quarter. The management has restated its medium-term target for EBIT margin, which remains at 19-20 percent. In addition, the company’s guidance for service revenue growth for FY24 is between 6.5-8.5 percent, indicating a higher rate of growth than that of Infosys. HCL tech is poised to grow due to the ongoing digital transformation; however, short to mid-term outlook for the company remain cautious due to the prevailing recession fears in America and Europe.


    Particulars (In Rs. Cr.) Q4FY23 Q3FY23 Q4FY22 QoQ YoY FY23 FY22 YoY
    Revenue from Operations 26,606 26,700 22,597 -0.4% 17.7% 1,01,456 85,651 18.5%
    Other Income 453 260 317 74.2% 42.9% 1,358 1,067 27.3%
    Total Income 27,059 26,960 22,914 0.4% 18.1% 1,02,814 86,718 18.6%
    Employee Benefit Expenses 14,665 14,163 12,603 3.5% 16.4% 55,280 46,130 19.8%
    Employee benefit Expenses as % of Sales 55.1% 53.0% 55.8% 210 bps -70 bps 54.5% 53.9% 60 bps
    Purchase of Stock-In-Trade 577 648 448 -11.0% 28.8% 2,072 1,473 40.7%
    Change in Inventories -14 6 -41 -333.3% -65.9% -67 -67 0.0%
    Outsourcing Expenses 3,786 3,865 3,210 -2.0% 17.9% 14,950 12,515 19.5%
    Depreciation & Amortisation Expense 1,027 1,137 984 -9.7% 4.4% 4,145 4,326 -4.2%
    Other Expense 1,729 1,653 1,324 4.6% 30.6% 6,593 5,070 30.0%
    EBIT 4,836 5,228 4,069 -7.5% 18.8% 18,483 16,204 14.1%
    EBIT Margin 18.2% 19.6% 18.0% -140 bps 20 bps 18.2% 18.9% -70 bps
    Profit After Tax (PAT) 3,981 4,096 3,599 -2.8% 10.6% 14,845 13,523 9.8%
    PAT Margin 15.0% 15.3% 15.9% -40 bps -100 bps 14.63% 15.79% -120 bps
    EPS (In Rs.) 14.71 15.13 13.27 -2.8% 10.9% 54.85 48.77 12.5%
    Segment Revenue (In Rs. Cr.) Q4FY23 Revenue % Q3FY23 Q4FY22 QoQ% YoY%
    IT & Business Services 19,632 74% 19,141 16,581 3% 18%
    Engineering & R&D services 4,274 16% 4,425 3,699 -3% 16%
    Products & Platforms 2,700 10% 3,134 2,317 -14% 17%
    Geography Revenue % Q4FY23 Q3FY23 Q4FY22 QoQ YoY FY23 FY22 YoY
    America 63.8 63.5 63.1 30 bps 70 bps 64.1 63.1 100 bps
    Europe 28.9 29.1 28.7 -20 bps 20 bps 28.4 28.7 -30 bps
    Rest of the World 7.3 7.4 8.2 -10 bps -90 bps 7.6 8.2 -60 bps
    Source: Company website, EWL Research

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