“We note that FY19 revenue guidance factors inorganic contribution from acquisitions already made and future acquisitions planned for the year. These inorganic contributions would aid revenues by around 5.25% for FY19. Thus the organic guidance would be 4.25%- 6.25% for FY19 which is subdued,” according to analysts at Antique Stock Broking.
“In an environment where peers are guiding for improving revenue growth in FY19, HCL Tech's organic revenue guidance is a clear indication of slowdown in the company's business. Though company has guided for increasing deal sizes and deal pipeline guidance implies lack of momentum in growth going forward. Lower organic growth in FY18 (around 5%) and similar organic growth guidance for FY19 raises concern and places the company in a difficult spot going forward. The weak guidance raises question on the growth sustainability of the company going forward,” the brokerage firm said in result review with ‘hold’ rating on the stock and target price of Rs 1,030.
HCL Tech FY19 guidance incorporates organic growth of around 5.25% at mid-point estimate, which is seen as disappointing, as it
sets off concerns about business prospects beyond FY19, analysts at Emkay Global Financial Services said in result update.
The brokerage firm believes that the strong investments in inorganic growth and IP portfolio are affecting its near term RoE (return on equity) and free cash generation, leading to lower valuation for the business. However, it
is believed that HCL Tech is making necessary investments that would future-proof its business from the altered demand scenario.
“We believe HCL Tech is best positioned from growth-to-valuation metrics and thus expect to deliver relative outperformance over peers in FY19. We maintain our HOLD rating on the stock with a target price of Rs 1075 (valued at 15x FY20e earnings),” it
At 10:29 am; the stock was trading 7% lower at Rs 932 on the BSE, against 0.34% decline in the S&P BSE
Sensex. A combined 2.79 million shares
changed hands on the counter on the BSE