Views on HCL Tech Ltd 1QFY2017 Results: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP - Research IT, Angel Broking) on HCL Tech Ltd 1QFY2017 Results:

HCL Tech (CMP: INR 801 / TP:INR 1,000 /Upside: 24.8%)

"For 1QFY2017, the company posted numbers better than expected, on all fronts. On sales, it posted sales of INR 11,336cr V/s INR 11,219cr expected and V/s INR 10,698cr in 3QFY2016 (the company had changed its Financial year to March), a QoQ growth of 6.0%. In US$ terms, it came in at US$1,691mn V/s US$ 1,674mn expected and V/s US$1,587mn, a QoQ growth of 6.5%. On CC terms, the QoQ growth for the company was 6.0%.

The growth was driven by Europe which posted a 16.9% Constant Currency (CC) QoQ growth, USA posted a 2.0% QoQ growth and a flat growth in ROW. In terms, of Industries, the manufacturing 12.0% QoQ CC growth, Public Services posted a 11.8% QoQ CC growth and Retail & CPG a 14.5% QoQ CC growth, while Financial Services posted a dip of 0.1% QoQ CC growth and Life sciences & Healthcare, posted a dip of 1.0% QoQ CC.

On the operating profit front, the EBIT margins came in at 20.6% V/s 19.4% expected and V/s 20.8% in 3QFY2016, QoQ dip of 19bps. The improvement in margins came on back of the volume growth higher than expected. Capacity utilization which was 85.8% V/s 85.6% in 3QFY2016. The attrition rate during the quarter was 17.8% V/s 17.3% in 3QFY2016. Thus, the Adj. net profit is expected to come in at INR 1,891cr V/s INR 1,925cr in 3QFY2016, a QoQ de-growth of 1.8%.

In terms, of client addition company added 10 clients in the US$20-30+ mn bracket. For FY2017, company gave guidance. FY'2017 revenues are expected to grow between 12.0-14.0% in CC. Revenue Guidance is based on FY'2016 (April to March'2016) average exchange rates. The above constant currency guidance translates to 11.2% to 13.2% in US$ terms based on June 30 2016 rates. Operating Margin (EBIT) for FY'2017 is expected to be in the range is from 19.5% to 20.5%. We maintain our BUY rating on the stock."

Shares of HCL TECHNOLOGIES LTD. was last trading in BSE at Rs.821.55 as compared to the previous close of Rs. 823.65. The total number of shares traded during the day was 53202 in over 2392 trades.

The stock hit an intraday high of Rs. 831.2 and intraday low of 816.1. The net turnover during the day was Rs. 43868435.

Source : Equity Bulls

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