HCL Technologies shares rose on Friday after the software exporter's quarterly profit exceeded Street estimates. The HCL Tech stock finished higher by Rs 2.2 or 0.2 percent at Rs 1,101.8 apiece on BSE, giving up most of the day's gains after touching Rs 1,135 at the strongest level of the day.
Post-market hours on Thursday, the company reported a 4.4 percent sequential increase in net profit to Rs 3,593 crore.
Its revenue expanded 1.2 percent in rupee terms on a quarter-on-quarter basis, and 0.5 percent in dollar terms, according to a regulatory filing.
HCL Tech CEO C Vijayakumar told CNBC-TV18 the company expects the products and platforms business to be volatile going forward. It will take time to start seeing gradual growth in this strategic bet, he said.
The company expects its services business to grow at a faster pace than the products unit for now, he said.
HCL Tech has several optimisation levers for its margin, CFO Prateek Aggarwal CNBC-TV18. He also said attrition at the company is starting to stabilise and expected to come down in the next few quarters.
Nomura maintained its 'buy' rating on HCL Tech with a target price of Rs 1,370.
Jefferies said the company's growth guidance of 12-14 percent for the year ending March 2023 is the key positive in its financial results, though the brokerage lowered its earnings per share estimate for the stock. It retained a 'buy' call on the stock but cut its target price to Rs 1,360.
The brokerage lowered its earnings per share (EPS) estimate for the company to 6-7 percent on account of higher tax rates and margin guidance.
What analysts say
The good thing about software sector is that the FY23 visibility is excellent, Emkay Global CEO-Institutional Equities Nirav Sheth told CNBC-TV18. However, he is concerned what the earnings will look like in the financial years ending March 2024 and March 2025 if recession were to happen.
"I still reckon that probably IT is a place to hide. We like Infosys," he said.
HCL Tech and Infosys are JM Financial Institutional Securities' top picks in the Tier I technology space, Research Analyst-IT Sector Manik Taneja told CNBC-TV18.
“Within the Tier II space, our preference has been with Mphasis and Persistent Systems through the last 18 months and that continues. Although valuations have come off for some other names as well and there might be some tactical trade ups in those names,” he said.
First Published: IST