HCL Technologies (HCL IN) - Healthy operational performance - CSEC Research

- In 1QFY18, HCL Technologies (HCLT) reported a healthy performance with USD revenue growing by 3.7%QoQ to USD 1,884mn. Revenue grew by 2.6% QoQ in CC terms. In INR terms, revenue grew by 0.8% QoQ to INR 121,490mn. Management has maintained CC revenue growth guidance at 10.5-12.5% for FY18 and expects EBIT margin in 19.5-20.5% range.

- EBIT margin improved by 8bps QoQ to 20.1% despite the headwind of INR appreciation led by improvement in revenue mix and operational efficiencies.

- In constant currency terms, across geographies, the growth was driven by Americas +3.8% QoQ, RoW +3.1% QoQ while Europe declined marginally -0.4% QoQ. Amongst services, ER&D (+7.9%QoQ), IMS (+1.7%QoQ), and Application services (+1.6%QoQ) posted growth while Business Services declined 6.7% QoQ. In terms of verticals, FSI (+5.3% QoQ), retail (+4.9% QoQ), Healthcare (+4.8% QoQ) and Manufacturing (+3.3% QoQ), posted the growth while public services (-2.7% QoQ) and telecom (-2.5% QoQ) declined.

Valuation: According to Bloomberg consensus, at CMP, the stock trades at P/E of 14.3x/13.1x on FY18E/FY19E EPS with target price of INR 957 implying a P/E of 14.2X on FY19E. Risks: Visa uncertainty, lower discretionary spending, pricing pressure and currency headwinds are key risks.

Shares of HCL TECHNOLOGIES LTD. was last trading in BSE at Rs.887 as compared to the previous close of Rs. 875.95. The total number of shares traded during the day was 36784 in over 1286 trades.

The stock hit an intraday high of Rs. 894.5 and intraday low of 876.55. The net turnover during the day was Rs. 32644135.

Source : Equity Bulls

Keywords