Recently Kotak Institutional Equities hosted a conference meet with HCL TECH management:
C Vijayakumar, CEO of HCLT, shared key highlights during our London conference, highlighting a strong medium-term growth journey.
Despite a challenging FY2024E, double-digit growth is still possible in the medium term.
The competitive environment for new deals is aggressive, but HCLT has impressed with well-placed bets, improved digital competencies, and continued success in mega deals.
Margin aspiration of around 20% remains intact, with a projected range of 18-19% for FY2024E.
Significant productivity gains are expected from AI in the medium term, contributing to HCLT's growth.
FY2024 will be a challenging year for growth, with a guided growth range of 6.5-8.5% in the services business.
HCLT maintains an aspirational EBIT margin target of 20% in the medium term, but there are no significant tailwinds to margins at present.
AI's potential will be realized in the medium term, with productivity gains expected to reach 15-20%.
HCLT remains prudent in capital allocation, with no significant investments required for developing capabilities in new/existing service segments.
The company aims to invest in new geographies and sectors where it is under-indexed relative to revenue potential.
Positives: HCLT's resilience, industry-leading growth, balanced service portfolio, cost management, and high payout.