Result Analysis: HCL Technologies Limited Result Update: Q3FY23

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.) 290877.75
    Face Value 2.00
    Equity (Cr.) 542.73
    52 Wk. high/low 1359 / 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: 50.88
    P/BV: 4.7
    P/E: 21.07

    Result Highlights:

    • Revenue of the company increased by 19.6% YoY and 8.2% QoQ to Rs.26,700 cr. as against the broader estimates of Rs.26,185 cr.

    • Operating profit margin for the quarter increased by 170 bps QoQ and 50 bps YoY to 19.6%.

    • Net Profit increased by 17.4% QoQ (despite current global headwinds) to Rs.4,096 cr. compared to the estimates of Rs.3,858 cr.

    • Among industries IT & Business services and Engineering, R&D services showed subdued growth of 5.3% and 5.4% respectively on QoQ basis. While Products & Platforms segment showed strong growth of 35.4% QoQ basis.

    • Across geographies, Europe grew by 160 bps while America and Rest of the world showed de-growth of 130 bps and 30 bps respectively on QoQ basis.

    • Company won 17 large deals; 7 in services & 10 in software. However total TCV were flat QoQ at $ 2.3 bn.

    • Attrition rate dropped significantly from 23.8% in September quarter’22 to 21.7% in this quarter.

    • Company added 5,892 employees in the quarter, total headcount is at 2,22,270.

    • HCL Tech announced dividend of Rs.10 per share.


    Financial Performance:

    HCL -Financial-Performance

    Shareholding Pattern: 

    Shareholding Pattern  
    Promoters & Promoter Group 60.72%
    FIIs 17.72%
    DIIs 16.54%
    Public   4.61%
    Others   0.41%

    Management Commentary:

    • Commenting on the December quarter results, C Vijayakumar, CEO and MD said, we have delivered strong performance this quarter across all key metrics. We are confident to deliver industry leading growth over the medium term supercharged by our positioning, our strong propositions and our passionate people.

    • Management downgraded the guidance for FY23; Revenue guidance decreased by 50 bps at the higher end to 13.5%-14.5% which was earlier 13.5%-14.5%.
    • EBIT Margin also narrowed to 18%-18.5% from earlier guidance of 18%-19%.


    HCL technologies showed good performance in Q3FY23 despite seasonal and macro headwinds. Company has maintained its growth momentum in both IT services as well as in the Engineering and Research & Development segments. But the new deal wins remained flat QoQ. The downward pull in revenue growth guidance shows the near term threat prevailing in the macro environment. The company reported EPS of Rs.40.14 for 9MFY23 which is higher from the 9MFY22 EPS of Rs.36.51. Keeping these in mind, we expect the eEPS for FY23 to remain at Rs.53.5 at the PE of 21x for the CMP of Rs.1077.


    Particulars (In Rs. Cr.) Q3FY23 Q2FY23 Q3FY22 QoQ% YoY% 9M FY23 9MFY22 FY22
    Revenue from Operations 26,700 24,686 22,331 8.2% 19.6% 74,850 63,054 85651
    Other Income 260 236 255 10.2% 2.0% 905 750 1067
    Total Income 26,960 24,922 22,586 8.2% 19.4% 75,755 63,804 86,718
    Employee Benefit Expenses 14,163 13,474 11,802 5.1% 20.0% 40,615 33,527 46130
    Employee benefit Expenses as % of Sales 53.0% 54.6% 52.9% -160 bps 10 bps 54.26% 53.17% 53.86%
    EBIT 5,228 4,427 4,257 18.1% 22.8% 13,647 12,135 16,204
    EBIT Margin (%) 19.6% 17.9% 19.1% 170 bps 50 bps 18.2% 19.2% 18.9%
    Profit After Tax 4,096 3,489 3,442 17.4% 19.0% 10,868 9,906 13,499
    PATM (%) 15.3% 14.1% 15.4% 120 bps -10 bps 14.52% 15.71% 15.76%
    EPS (in Rs.) 15.13 12.89 12.69 17.4% 19.2% 40.14 36.51 49.77


    Segment Revenue (In Rs. Cr.) Q3FY23 Revenue % Q2FY23 QoQ% Q3FY22 YoY%
    IT & Business Services 19,141 71.7% 18,172 5.3% 15,775 21.3%
    Engineering & R&D services 4,425 16.6% 4,199 5.4% 3,547 24.8%
    Products & Platforms 3,134 11.7% 2,315 35.4% 3,014 4.0%


    Geography Revenue % Q3FY23 Q2FY23 Q3FY22 QoQ YoY
    America 63.5 64.8 63.4 -130 bps 10 bps
    Europe 29.1 27.5 28.7 160 bps 40 bps
    Rest of the World 7.4 7.7 7.9 -30 bps -50 bps
    Source: Company website, EWL Research

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