Buy HCL Technologies Ltd - Motilal Oswal

HCL Technologies (HCLT IN; Mkt Cap USD7.7b, CMP Rs508, Buy)

HCL Tech reported revenue growth of 7.5% QoQ, in 2QFY11, Volume growth of 6.8% in software services was the best in class, Revenue of US$864.1m was up 7.5% QoQ with software services growing 7.3% QoQ, infrastructure services growing 9.4% and BPO growing 2.9% QoQ The management reiterated its prior guidance of increasing margins (EBITDA) to ~18% by 4QFY11.

2QFY11 results reinforce our positive thesis on HCL Tech, driven by: (1) High exposure to fastest growing service lines (IMS - 22.8%, R&D services - 18.5%), (2) large deal prowess in a returning deals scenario (3) successes in impending contract renegotiations and (4) expected margin improvement on levers like utilization, bulge mix, SGA rationalization and BPO turnaround. Maintain Buy, with a target price of Rs550, based on 15x FY13E EPS.

Source : Equity Bulls

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