2025-06-11-花旗集团-HCL科技（HCLT）_HCL科技公司（HCLT.BO）_管理层会议要点_12页_536kb

HCL Technologies (HCLT.BO) & Infosys (INFY.BO) Summary

Core Content and Key Takeaways

Management Meeting Insights

• Discretionary Spend: Discretionary spend is subdued, with a lot of cost takeout deals in the market, but decision-making is slow, especially for new investments.
• Sector Performance: HCLT is performing better in BFSI, telecom, and tech sectors. Consumer and manufacturing sectors remain challenging, while there is some uncertainty in healthcare/life sciences.
• Margin Outlook: Margins are expected to remain stable in the short term, with a focus on investing in newer sales areas. The medium-term goal is to return to pre-Covid margin levels.
• Gen AI Strategy: HCLT has a head start in Generative AI (Gen AI) and has been using it to drive productivity and efficiency. Four offerings (AI Force, AI Foundry, AI Labs, and AI engg) have seen good adoption. The company aims to secure 100 significant Gen AI customers in FY26.
• RoIC and Cash Flow: The company is focused on improving Return on Invested Capital (RoIC), with solid cash conversion and a high dividend payout.

Valuation and Target Price

• HCLT Valuation: The target price for HCLT is Rs1,510, based on a 22x P/E multiple for FY26E earnings, which is a premium to its five-year average of 19x.
• Infosys Valuation: The target price for Infosys is Rs1,525, based on a 22x P/E multiple for FY26E earnings, within its five-year range of 13x–32x.

Investment Rating and Catalyst Watch

• Rating Distribution: Citi Research has a Neutral (Hold) rating for HCLT, with a 36% probability of a Buy rating and 48% of Hold.
• Catalyst Watch: A Catalyst Watch was added in March 2024 for a Downside direction, but it was removed in April 2024. The company is seen as having a Neutral outlook with no clear short-term catalysts.

Guidance and Pipeline

• Guidance: HCLT has provided guidance for FY26, assuming a 2%–5% YoY growth, depending on the environment and deal closures.
• Pipeline: Despite good bookings of ~US$3b in the prior quarter, the pipeline is strong. The company is focusing on new sales areas and investing in public sector and solutions.

Risks

• Upside Risks for HCLT: Healthy demand outlook, INR depreciation, and higher billing rates.
• Downside Risks for HCLT: Sharp slowdown in the US/global economy, rupee appreciation, acquisition risks, and negative margin implications from large deals.
• Upside Risks for Infosys: Healthy demand outlook, INR depreciation, and higher billing rates.
• Downside Risks for Infosys: Prolonged slowdown in the US/Europe economy, rupee appreciation, pressure on billing rates, and immigration reform.

Strategic Focus

• GCC Strategy: HCLT has established a practice for GCCs, focusing on partnership-based deals rather than full BOT transitions. The goal is to derive long-term value from these opportunities.
• Project Ascend: The project is aimed at improving margins, with a focus on investing in newer sales areas where HCLT is under-indexed.
• Public Sector Unit: A new unit has been set up to address public sector business, funded through savings.

Analyst Information

• Analysts: Surendra Goyal and Rajiv Berlia are the primary analysts for this report.
• Contact:
  • Surendra Goyal: +91-22-6175-9870, surendra.goyal@citi.com
  • Rajiv Berlia: +91-22-6175-9871, rajiv.berlia@citi.com

Conflict of Interest

• Investment Banking Clients: Citi Research and its affiliates are investment banking clients of HCLT and Infosys. This may create potential conflicts of interest.
• Non-Investment Banking Services: The firm also provides non-investment banking services to these companies, which could influence analyst recommendations.

Research Methodology

• Investment Rating: Based on expected total return (ETR) and risk. ETR is calculated as the sum of price appreciation/depreciation and dividend yield.
• Catalyst Watch: Indicates the analyst's expectation of share price movement over 30 or 90 days due to specific near-term catalysts. A Catalyst Watch is issued with high confidence, while STV is with moderate confidence.
• Disclosure: Citi Research has policies to manage conflicts of interest and ensure independence in research. Analysts are not compensated based on specific recommendations.

Conclusion

HCL Technologies continues to execute well in a challenging environment, with a focus on organic growth, stable margins, and Gen AI innovation. Despite uncertainties in some sectors, the company is well-positioned to return to pre-Covid levels. The stock trades at a discount to its five-year average P/E, which supports the target price. The outlook for both HCLT and Infosys is similar, with a Neutral rating and a focus on long-term value creation.