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Research
HCL Technologies - 3QFY2013 Result Update - Angel Broking
Posted On : 2013-04-19 22:59:04( TIMEZONE : IST )
For 3QFY2013, HCL Technologies (HCL Tech) reported yet another set of healthy results, beating our as well as market expectations on all fronts. HCL Tech won over US$1bn multi-year, multi-million dollar deals during the quarter, thus sustaining its momentum of signing ~US$1bn+ total contract value (TCV) worth of deals, over the past few quarters. The strong set of results from HCL Tech for 3QFY2013 shrug off any concerns regarding the health of the Indian IT industry, which were raised due to weak quarterly results by Infosys. HCL Tech's Management sounded confident of sustaining revenue growth within the top-tier league. We maintain our Buy rating on the stock.
Quarterly highlights: For 3QFY2013, HCL Tech reported revenue of US$1,191mn, up 3.2% qoq, on the back of a whopping 9.0% qoq USD revenue growth in constant currency (CC) terms in its infrastructure services business, though volume growth in core software services stood muted at 0.4% qoq. During the quarter, HCL Tech's EBITDA margin declined by 18bp qoq to 22.4%, while the EBIT margin remained almost flat qoq at 19.9%. PAT stood tall at Rs. 1,040, up 7.8% qoq, aided by forex gain of Rs. 23cr vs a Rs. 13cr loss in 2QFY2013.
Outlook and valuation: The company is witnessing a healthy demand environment and has been able to win over US$1bn multi-year, multi-million dollar deals this quarter, thus sustaining its momentum of signing ~US$1bn+ TCV worth of deals, over the past few quarters. The Management maintained that the deals are out of vendor-churn exercises rather than on any incremental spending. However, we believe, in such a competitive scenario where all the 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 12.8% and 15.3%, respectively, over FY2012–15. We value the company at 14x FY2014E EPS and give it a target price of Rs. 863. We maintain our Buy rating on the stock.
