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Research
HCL Technologies - 3QFY2012 Result Update - Angel Broking
Posted On : 2012-04-20 10:47:46( TIMEZONE : IST )
For 3QFY2012, HCL Technologies (HCL Tech) reported a modest set of numbers. The most remarkable highlight of the result was deal bookings (excluding contract renewals) of US$1.5bn plus across 14 customers in this quarter and US$2.5bn plus in the last six months across 32 customers. Management has indicated that most of the deal bookings since the last six months are coming from vendor consolidation. We recommend Accumulate on the stock.
Quarterly highlights: For 3QFY2012, HCL Tech reported revenue of US$1,048mn, up 2.5% qoq, on the back of 2.9% qoq volume growth in core software business and USD revenue growth of 4.5% qoq in CC terms in infrastructure services business. EBITDA and EBIT margins declined slightly by 11bp and 16bp qoq to 18.4% and 15.7%, respectively, because of 91bp negative impact due to exchange movement, which was partially offset by 75bp positive impact on account of an increase in operational efficiencies. PAT came in at Rs.603cr, impacted by forex loss of Rs.36cr, during the quarter.
Outlook and valuation: Management is witnessing a robust demand environment and has done deal bookings worth US$2.5bn plus over the last six months, excluding contract renewals. Management maintained its stance that the deals are out of vendor-churn exercises rather than any incremental spending. However, we believe, in such a competitive scenario where all companies are eyeing the existing pool of deals, an aggressive company like HCL Tech with end-to-end IT capabilities will emerge as a front-runner. We expect HCL Tech to post USD and INR revenue CAGR of 12.5% and 12.4%, respectively, over FY2012–14E, on the back of its higher-value services portfolio, which is set to address the current demand landscape. We expect EBITDA to post a 10% CAGR over FY2012–14E. PAT, on the other hand, is expected to post a higher CAGR of 15.3%, with improving profitability, forex gains on hedges and treasury gains. We recommend Accumulate on the stock with a target price of Rs.560.
