HCL Technologies falls 12% in two days on weak FY19 revenue guidance

Shares of HCL Technologies have dipped 7% to Rs 924 per share on the market in early morning trade, extending their 5% fall on Wednesday as weak organic growth guidance raised concerns, according to analysts.
For the current financial year 2018-19 (FY19) HCL Tech has guided for constant currency (CC) revenue growth of 9.5%-11.5% (10.5%-12.5% in USD terms) and EBIT (earnings before interest and tax) margin guidance of 19.5%-20.5%.

“We note that FY19 revenue guidance factors inorganic contribution from acquisitions already made and future acquisitions planned for the year. These inorganic contributions would aid revenues by around 5.25% for FY19. Thus the organic guidance would be 4.25%- 6.25% for FY19 which is subdued,” according to analysts at Antique Stock Broking.

“In an environment where peers are guiding for improving revenue growth in FY19, HCL Tech's organic revenue guidance is a clear indication of slowdown in the company's business. Though company has guided for increasing deal sizes and deal pipeline guidance implies lack of momentum in growth going forward. Lower organic growth in FY18 (around 5%) and similar organic growth guidance for FY19 raises concern and places the company in a difficult spot going forward. The weak guidance raises question on the growth sustainability of the company going forward,” the brokerage firm said in result review with ‘hold’ rating on the stock and target price of Rs 1,030.