IMD Weather Update: Cold wave in northern regions, fog to continue its grip over parts of India- Check details As cold waves continue to batter the country’s northern region, dense to very dense fog conditions are likely to stay over some parts of northwest & east India for the next 2 days, the India Meteorological Department (IMD) stated.Severe cold-day conditions are very likely in many parts of Punjab, and Haryana on January 4 and January 5, and cold-day conditions in isolated pockets on Jan 5, IMD mentioned while adding that a few places in Uttar Pradesh, and east Rajasthan will see chilly weather.Further, fog conditions are very likely to prevail during night & morning hours in some parts of Punjab, Bihar, Tripura, Madya Pradesh, and Uttar Pradesh on January 04 and January 05, the weather forecast agency mentioned. *Fog conditions observed* (at 0530 hours IST of today, 04.01.2024): *Very Dense fog* over Uttar Pradesh, Chandigarh, Rajasthan, Bihar; *Dense Fog* over Madhya Pradesh and Tripura and *Moderate Fog* over Jammu Division Isolated pockets of hilly regions like Jammu & Kashmir, Ladakh, Gilgit, Baltistan, Muzaffarabad, and Himachal will see dense fog conditions for a few hours in the morning hours. The Minimum temperatures are in the range of 6-9°C over most parts of Punjab, Haryana, Chandigarh, Delhi, West Uttar Pradesh, and Rajasthan. East Uttar Pradesh, north Madhya Pradesh, Bihar, Jharkhand, West Bengal & Sikkim will see temperatures between the range of 10-12°C. Notably, these are above normal conditions by 2-4°C over many parts of India. As per IMD, the rise of 2-3°C in minimum temperatures is also likely over many parts of central & east India during the next 3 days. Northern regions will see no significant change in minimum temperatures during the next 5 days Under the influence of the above low-pressure area over the southeast Arabian Sea, light to moderate rainfall at some places is very likely over south Tamil Nadu, north & south Kerala, and Lakshadweep during the next 3-4 days. Further, isolated heavy rainfall is predicted in Lakshadweep on January 4 and 5. Light isolated rainfall is also likely over Madhya Pradesh and Chhattisgarh during next 2 days.
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.