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HCL Technologies - 4QFY2012 Result Update - Angel Broking
Posted On : 2012-07-27 23:25:28( TIMEZONE : IST )
For 4QFY2012, HCL Tech reported a strong set of numbers beating our expectations across the board. The most remarkable highlight of the result was that the growth was broad based - across all geographies, services lines as well as industry verticals. HCL Tech, with end-to-end IT capabilities and a strong client mining ability, is clearly emerging as a front runner and outperforming many of its peers in the industry. We recommend Accumulate rating on the stock.
Quarterly highlights: For 4QFY2012, HCL Tech reported revenue of US$1,080mn, up 3.0% qoq, on the back of 1.8% qoq volume growth in core software services business and 9.2% qoq USD revenue growth in CC terms in infrastructure services business. EBITDA and EBIT margin improved substantially by 359bp and 372bp qoq to 22.0% and 19.4%, respectively, which is a commendable task, on the back of INR depreciation and operational efficiencies.
Outlook and valuation: Management is witnessing a healthy demand environment and has signed eight multi-year, multi-million transformational deals during 4QFY2012. HCL Tech won 52 transformational deals during FY2012. Management maintained its stance that the deals are out of vendor-churn exercises rather than any incremental spending. 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 and a strong client mining ability will emerge as a front runner. We expect HCL Tech to be the outperformer among tier-I IT companies, with USD and INR revenue CAGR of 11.9% and 13.4%, 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 8.5% CAGR over FY2012-14E. PAT, on the other hand, is expected to post a higher CAGR of 11.8%, with improving profitability and forex gains on hedges. We value the company at 13x FY2014E EPS and give it a target price of Rs.585. We recommend Accumulate rating on the stock.
