HCL Tech to turn ex-dividend tomorrow, to pay third interim dividend of ₹10 per share

On Tuesday, HCL Tech shares closed at ₹1,009.60 apiece up by 1.49% on BSE. The company’s market cap is almost ₹2.74 lakh crore.

HCL Tech announced a third interim dividend of ₹10 per equity share on October 12. The company fixed October 20 as the record date to identify eligible shareholders for the dividend benefit.

That being said, the company will turn ex-dividend a day before the record date which is October 19.

The record date in a dividend means all the shareholders whose name appears in the company’s list by the end of the record date will be eligible to receive dividends. Meanwhile, the ex-dividend date is the day the price of the equity shares of a company gets adjusted for the dividend payout.

The company plans to pay the third interim dividend by November 2.

HCL Tech is among the dividend king stocks with a dividend yield of more than 4% currently.

The company has already paid the first and second interim dividends to its shareholders for FY23. The first interim dividend of ₹18 per share was paid in April, while the second dividend of ₹10 per share was paid in July this year. This would be a dividend of 1400% or ₹28 per share.

Taking into consideration, the third interim dividend, HCL Tech will pay a total of ₹38 per share so far in FY23.

In FY22, the company paid an equity dividend of a whopping 2,100% to ₹42 per share. The dividend aggregated to a massive ₹11,392 crore.

In July to September 2022 quarter, HCL Tech garnered a consolidated net profit of ₹3,489 crore up by 6% yoy, while revenue surged by 19.5% yoy to ₹24,686 crore. In constant currency, HCL Tech’s revenue growth came in at 15.8% yoy and 3.8% qoq. In dollar terms, HCL Tech’s revenue stood at $3,082 million higher by 10.4% yoy and 1.9% qoq.

HCL Tech expects services revenues to be 16%–17% YoY in constant currency for FY23, while revenue guidance increased to 13.5%–14.5% YoY in constant currency. EBIT margin guidance has been revised to 18%–19% for the current fiscal.

Should you invest in HCL Tech shares?

Omkar Tanksale, a Research Analyst at Axis Securities in a report said, “HCL Tech has managed to deliver strong revenue growth backed by a strong deal pipeline. Rising supply-side constraints put pressure on the margins and a potential slowdown may slow the revenue growth momentum in forthcoming quarters. We recommend a BUY rating on the stock and assign a 16x P/E multiple to its FY24E earnings of ₹64.9/share to arrive at a TP of ₹1,065/share.”

Analysts Devang Bhatt and Dhawal Joshi at IDBI Capital in their report said, “the company is seeing multiple levers in terms of higher realization, utilization and easing of supply-side challenges. As a result, we have revised our EBIT estimates upwards (within the guided range of 18-19%) leading to an EPS upgrade of 3.0% in FY24E. This coupled with improving product revenues and higher dividend yield prompt us to upgrade the stock from Hold to Buy rating with a target price of ₹1,095 (18x PE on FY24E EPS).”

Further, analysts Dipesh Mehta, Ayush Bansal, and Ruchita Agarwal at Emkay Global in their report said, “We raise our earnings by 0.9% to 2.5% for FY23E-25E, factoring in the Q2 performance. We maintain BUY, with a TP of Rs1,070/share at 17x Sep-24E EPS (earlier, Rs1,060), considering reasonable valuations and the >4% dividend yield.”

JM Financial analysts Manik Taneja and Dimel Francis in their report also maintained a buy rating while raising their target price on HCL Tech. The duo said, “We tweak revenue estimates a tad and raise FY23E-25E EPS by 0-3.5% resulting in an increase in TP to ₹1,075(V/s INR 1,030 earlier).”

Meanwhile, analysts Kawaljeet Saluja and Sathishkumar S at Kotak Institutional Equities believe HCL Tech has the potential to reach ₹1,250 apiece on exchanges. They said, “HCLT impressed with a strong 5.3% qoq c/c growth in services, a sharp 100 bps qoq increase in EBIT margin, a mega-deal announcement, and strong TCV. It also raised FY2023E revenue guidance and is on track to lead peers in growth in services. HCLT’s vastly improved digital competencies remain underappreciated. We raise FY2023-25 ​​c/c revenue estimates by 30-80 bps, EPS by 2-3% and SoTP-based Fair Value to Rs1,250 (from Rs1 ,165). BUY.”

While giving outperform rating on HCL Tech, Abhimanyu Kasliwal and Yash Patel analysts at Choice India in their report said, “Keeping in mind that company may not be completely immune to macro headwinds faced by the sector, we maintain an Outperform rating with a slightly lowered target price of 1238 (earlier 1257) based on 18.2x NTM EPS of Rs.67.9 implying an FPE of 16.2x on FY24E EPS & 12.7x on FY25E EPS.”

Further, ICICI Direct analysts have upgraded their rating to Buy from Hold on HCL Tech. In its report, the analysts said, “We value HCLT at ₹1115 ie 18x P/E on FY25E EPS.”

On the other hand, Centrum analysts give ADD rating on HCL Tech. In a report, they said, “We expect HCL Tech’s revenue/EBITDA/PAT to grow at 12%/12%/12% between FY22-25E. We value HCL Tech at 16x H1FY25 EPS to arrive at a target price of 1,075 representing a 14% upside and re-initiate coverage with an ADD rating Revenues in-line with estimates, HCL Tech raises revenue guidance to 13.5%-14.5% CC.”

However, Nirmal Bang has given a ‘Sell’ rating on HCL Tech. In a report, the stock brokerage’s Head of Research Girish Pai said, “We believe that HCLT will also feel the negative impact of the stag-flationary environment developing in the western world, which will likely affect tech spending in FY24. Post 2QFY23, our estimates broadly remain unchanged. We maintain our ‘Sell’ rating with a target price (TP) of Rs842 (13.9x Sept’24E EPS, multiple maintained; 30% discount to target PE of TCS). While in the very near term, the stock may react positively to the results and the relatively bullish commentary on 2HFY23, we believe these numbers were broadly expected and that focus should be on FY24 and beyond.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.