HCL Technologies Ltd Research ReportQ3FY21

Digital & product business drove margins…. HCL Technologies (HCL) reported healthy margins in Q3FY21 and were above our estimates. The company has also revised its margins guidance upwards from 20-21% in FY21E to 21-21.5%. Revenues were in line with our estimate at 3.5% QoQ in CC terms, while margins were above our estimates. HCL has signed 13 transformational deals across industry verticals, including Life Sciences and Healthcare, Technology and Financial Services. The company has declared a dividend of | 4/share. Cloud, products and large deals to drive growth HCL Tech witnessed a healthy quarter mainly led by traction in cloud, digital and product business. Going forward, we expect HCL Technologies to be a key beneficiary of growing opportunities in cloud, app & platform modernization and cybersecurity. The company’s expertise in Infrastructure Management Services (IMS) and app modernisation can witness phenomenal growth led by integrated deals in cloud. HCL Tech also witnessed healthy traction in deal TCV (up 13% YoY) and deal pipeline. This coupled with improvement in product business (led by new license sale, new logos and cross sell opportunities with services) will further boost growth. In addition, improvement in large deal wins, inorganic growth and opportunities in captive carve outs makes us positive in company’s revenue trajectory in long term. Hence, post a 2.7% YoY growth in FY21E dollar revenues we expect the company to clock 12.0% and 11.5% YoY growth in FY22E & FY23E, respectively.