Stocks To Watch: Apollo Tyres, Infosys, Cipla, SJVN, Coal India Stocks in focus: GIFT Nifty traded in the red at 19,857.5, down by 48 points or 0.24% during Thursday’s early trading session, indicating a negative opening for domestic indices NSE Nifty 50 and BSE Sensex. On Wednesday, September 20, the NSE Nifty 50 plunged 231.90 points, or 1.15%, to end the trading session at 19,901.40, while the Sensex tumbled as much as 796 points, or 1.18%, to 66,800.84. “The domestic markets remained under pressure due to rising US bond yields and a stronger greenback. Concerns reigned over upcoming FED policy, interest rate trajectory and rising oil prices. Bank Nifty underperformed today due to rising cost of funds and reduction in deposits leading to moderation in net yield,” said Vinod Nair, Head of Research at Geojit Financial Services. The Indian IT giant has expanded its strategic partnership with the USA-based NVIDIA. The partnership is aimed at driving productivity gains with generative AI applications and solutions. Infosys will train 50,000 employees on NVIDIA AI technology. The Indian government plans to sell a 2.46% stake in the hydroelectric power generation company by offering up to 966,729,622 equity shares for sale on both September 21 and 22. There is also an option to further sell an additional 966,729,621 equity shares. InvaGen Pharmaceuticals Inc. ‘s manufacturing facility in Central Islip, New York, has received five inspectional observations in Form 483 from the US FDA after they conducted an inspection at the manufacturing facility of unit InvaGen from September 11 to 13. The Indian PSU giant announced that the company has been served a three-day strike notice by central trade unions. The Indian government pension fund bought 20 lakh shares at Rs 1,180 per share.
Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
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Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.