HCL Technologies - Q1FY21 First Cut - ICICI Securities

(CMP: Rs. 636, MCap: Rs. 172,860 crore)

HCL Tech's Q1FY21 profits were above our estimate. The company reported a constant currency revenue de-growth of 7.2% QoQ in dollar terms (vs our expectation of 7.5% QOQ decline). In constant currency terms the company's revenue geographically decreased 6.9% QoQ in Americas & 8.5% QoQ in in Europe. Vertically the de-growth was led by manufacturing, Telecommunication, Media, Publishing & Entertainment & Retail & CPG which declined 18.8% QoQ, 15.5% QoQ and 9.0% QoQ respectively. In terms of service wise split, the company's IT and Business services decreased 7.8%, ER&D declined by 9.0% QoQ and Products declined by 2.1% QOQ in constant currency terms. In terms of margins IT and Business services stood at 18.8%, Engineering stood at 18.7% and Products & Platforms stood at 31.6% and were above our estimates.

Q1FY21 Earnings Summary

- Revenues in constant currency declined by 7.2% QoQ. US$ revenues declined at $2,356 million (vs our estimate of $2,339 million). Revenues in rupees declined by 4.0% QoQ to Rs. 17,841 crore (vs. our estimate of 17,734 crore)

- EBIT margins declined 36 bps QoQ to 20.5% mainly on account of decline in gross margins. However, it was higher than our estimate of 19%

- PAT of Rs. 2,923 crore was above our Rs. 2,656 crore estimate led by higher than expected other income

We would be keenly watching the company's commentary on organic growth in IT services and outlook on product business and outlook on margin sustainability. We would be revisiting our estimates and target price post the conference call.

Shares of HCL TECHNOLOGIES LTD. was last trading in BSE at Rs.623.45 as compared to the previous close of Rs. 627.65. The total number of shares traded during the day was 749251 in over 16628 trades.

The stock hit an intraday high of Rs. 643.9 and intraday low of 610. The net turnover during the day was Rs. 472572832.

Source : Equity Bulls

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