HCL Tech rallies 7%, hits record high after mid-quarter business update

The IT major further said the Ebit margin for the current quarter is expected to be between 20.5-21 per cent

Shares of HCL Technologies rallied 7 per cent to hit a record high of Rs 768.90 on the BSE on Monday after the company said it expects the revenue and the operating margin for the July-September quarter (Q2FY21) to be meaningfully better than the top end of the guidance it had provided in July’2020. The stock surpassed its previous high of Rs 738.80, touched on September 8, 2020.

"We have seen strong execution during the quarter to date, and continue to execute to the plan this month. The Revenue growth for the current quarter is expected to exceed 3.5 per cent quarter on quarter in constant currency (CC), enabled by broad based momentum across all service lines, verticals and geographies,” HCL Technologies said in mid-quarter business update.

The IT major further said the earnings before interest and tax (EBIT) margin for the current quarter is expected to be between 20.5 per cent and 21.0 per cent.

Good booking momentum continues this quarter, led by life sciences & healthcare, telecom & media and financial services verticals. The pipeline continues to look healthy across service lines, verticals and geographies, it said.

HCL Technologies had expected CC growth of 1.5 per cent-2.5 per cent for the next three quarters, which translated to revenue decline of 0.8 per cent-3.3 per cent in FY21E. It had expected the margins to be in the range of 19.5 per cent and 20.5 per cent range.

In the past three months, the stock has outperformed the market by surging 34 per cent, as compared to 15.7 per cent rise in the S&P BSE Sensex.

“HCL Technologies is looking to defend/expand margins in FY21-an impressive thing, in our view. The management believes worst is over and is confident of good growth trajectory- confidence is based on large deals, 40 per cent higher pipeline compared to pre-Covid and stability across verticals such as financial services, healthcare, telecom and consumer packaged goods (CPG). We expect revenue decline of 2.5 per cent $ terms in FY21E. Due to strong margin performance, strong execution & strong recovery in FY22 on pent-up demand led to around 10 per cent for FY22/23”, analysts at Prabhudas Lilladher said in Q1FY21 result update.

At 10:15 am, the stock was trading 6 per cent higher at Rs 766.55 on the BSE, against 0.68 per cent rise in the S&P BSE Sensex. A combined 6.5 million equity shares have changed hands on the counter on the NSE and BSE, so far.