Buy HCL Technologies - PINC Result Update

HCL Technologies reported a strong Q4FY10 with revenues of USD737.6mn (7.6%QoQ growth) led by a massive volume growth of 10.5%QoQ (Software services).

* Strong volume led growth, forex loss continues to dent profitability
* Healthy growth in US and across emerging verticals
* Strategic spend drives growth in EAS and Engg services
* Robust demand outlook, sustainable margins and lower OCI losses will improve profitability

Outlook – HCL Tech has a large deal pipeline spread across various emerging verticals, spending in manufacturing has come back. A strong net addition of 6,428 employees (highest ever) indicates the visibility for strong demand; a large chunk of these were laterals. Salary hikes in Q1FY11 will have a negative impact on the margin but higher utilisation going forward and change in service mix will offset this negative impact. Lower OCI losses will also lead to higher profitability.

We maintain 'BUY' recommendation on the stock with a target price of Rs455 based on 15xFY12E EPS.

Source : Equity Bulls

Keywords