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HCL Technologies Ltd Research Report - 28th Jan 2016

IT | Published on Jan 27th 2016

IT

HCL Technologies (HCL Tech) reported better-than-expected results for 2QFY2016. It posted a sales growth of 1.4% qoq to US$1,566mn V/s an expected US$1,568mn. In constant currency (CC) terms, revenue grew 2.1% qoq. On the operating front, the EBITDA margin came in at 21.5% (V/s an expected 20.9%) an uptick of 58bp qoq. Consequently, the PAT came in at Rs1,920cr (V/s an expected Rs1,739cr), a growth of 5.3% qoq. On back of a strong order book, the company expects 2HFY2016 to be better than 1HFY2016. We maintain our Buy recommendation on the stock with a price target of Rs1,038. Quarterly highlights: The company has reported better-than-expected results for the quarter. It posted a sales growth of 1.4% qoq to US$1,566mn V/s an expected US$1,568mn. In constant currency (CC) terms, revenue grew 2.1% qoq. In CC terms, the key geography which drove sales was Americas, which grew 5.5% qoq; while Europe and ROW posted a dip of 2.4% qoq and 3.4% qoq, respectively. On the operating front, the EBITDA margin came in at 21.5% (V/s an expected 20.9%) an uptick of 58bp qoq. Consequently, the PAT came in at Rs1,920cr (V/s an expected Rs1,739cr), a growth of 5.3% qoq. On the productivity front, the blended utilization came in at 84.7% V/s 83.6% in 1QFY2016, while the attrition rate came in at 6.4% V/s 7.1% in 1QFY2016. Outlook and valuation: We expect HCL Tech to post a USD and INR revenue CAGR of 13.0% and 13.2%, respectively, over FY2015–17E. On back of strong order book and given the attractive valuations, we recommend a Buy on the stock.

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Accumulate

CMP 840
Target Price 1,038
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)111,951.51
MCAP NSE (Rs in Cr)111,986.79
P/E (x)14.12
EPS (Rs.)56.20
BV (Rs.)163.60
Div Yield (%)2.01
FV (Rs.)2.00
P/BV (x)3.82
EV/Sales (x)3.40
EV/EBITDA (x)16.27

Shareholding Pattern (%)

Promoter60.0
Foreign26.0
Institution7.0
Public & Others4.0
Corporate3.0
Grand Total100.0

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