HCL Technologies - 2QFY2014 results - Angel Broking

Views of Ms. Ankita Somani (Research Analyst - IT, Angel Broking) on HCL Technologies 2QFY2014 results:

"For 2QFY2014, HCL Tech came out with better than expected set of results largely on all fronts, joining Infosys in signaling the likelihood of a stronger year ahead. The dollar revenues came in at US$1,321mn, up 4% qoq (estimate - 3.3%), led by strong 6% qoq dollar revenue growth in Infrastructure management services (IMS). Excluding IMS, revenue growth of the company was becoming a concern since last four quarters and in this quarter the company shrugged that off by registering 3.1% qoq USD revenue growth in that (1% in 1QFY2014). In INR terms, revenues came in at Rs. 8,184cr, up 2.8% sequentially. EBIT margin of HCL Tech declined marginally, though less than expected, by 10bp qoq to 23.7% (estimate - 23.5%). HCL Tech's EBIT margin has grown by more than 350bp on a yoy basis which is creditable task. Historically, operating margin has been a concern for HCL Tech but the company has shrug off all the concerns by consistently posting increase in operating margins since last six quarters. PAT grew by 5.6% on a qoq basis to Rs. 1,495cr (estimate - Rs. 1,450cr), assisted by sequentially lower forex losses at Rs. 158cr as against loss of Rs. 236cr in 1QFY2014.

HCL Tech won 15 transformational deals during the quarter and booked US$1bn+ TCV worth of deals, sixth consecutive quarter of signing ~US$1bn TCV worth of deals. HCL Tech has a strong position in one of the fastest growing service vertical of IMS and on the back of this the company has been growing largely at par with its peers. The concern of weak growth in core software services have been shrugged off by the company in the current set of results and management indicated that the deal pipeline in this area of services continues to remains healthy. Overall, the company performed exceptionally well on the margins front and we continue to remain positive on the stock for a longer-term perspective keeping in notice the company's deal signing trajectory and healthy operating performance since last several quarters. We maintain our Accumulate rating on the stock."

Source : Equity Bulls

Keywords