HCL Technologies hits 52-week low

The stock has fallen to its 52-week low of Rs 759, down 5%, extending its Thursday's 4.5% decline on the BSE.

HCL Technologies has fallen to its 52-week low of Rs 759, down 5%, extending its Thursday’s 4.5% decline on the BSE, after the company reported disappointing set of numbers for the quarter ended March 2016 (Q4FY16).

The country's fourth-largest information technology (IT) services firm HCL Technologies reported lower-than-expected a marginal 0.3% growth in consolidated net profit at Rs 1,926 crore for Q4FY16 on sequential basis. Revenues grew 3.4% at Rs 10,698 crore on quarter on quarter (QoQ) basis.

Analyst on an average expected net profit of Rs 1,951 crore on revenues of Rs 10,806 crore.

However, most of the brokerage houses maintain ‘buy’ rating on the stock with revised price target.

“The increasing complexity deals engagement (slower deal conversion) and integration of headwinds will result in volatile earnings performance in FY2017. Further, lack of conviction in management commentary on the organic growth front, ex Volvo in Q1FY2017 and absence of margins guidance, will affect the near-term stock’s performance. We have revised our estimates down for FY2017 and FY2018 by 7% and 2% respectively,” Sharekhan said in a results update.

The brokerage house expect, after near-term hiccups and volatility, margins performance will start showing improvement with deals reaching steady state (also reflects in revenue growth), which will be the most important rerating trigger for HCL Technologies.

“We continue to prefer HCL Technologies for its healthy order book and presence in the infrastructure management services (IMS) and engineering R&D segment. However, the margin trajectory will be key for valuations hereon. The stock is currently trading at 12.7x FY18e EPS and factors in the investor concerns on margins. We maintain Buy with a revised target price of Rs 945 per share,” Antique Stock Broking said in result preview.

“We are negatively surprised by the management’s unwillingness to provide any target earnings before interest, tax (EBIT) margin range citing consolidation of large acquisitions in the near time. We note that the management historically maintained a target EBIT range of 21-22% through a long time frame that included periods of margins trending above range as well as through the past 4 quarters when margins were below range,” Emkay Global Financial Services said in a note.

The brokerage house downgrade stock to “Accumulate” (V/s BUY earlier) with a revised target price of Rs 900 (V/s Rs 960 earlier).

At 09:41 am, the stock was down 4% at Rs 766 on the BSE. A combined 2.49 million shares changed hands on the counter on the BSE and NSE so far.