8/3/2019 HCL Technologies Ltd - Q1FY12 Result Update
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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.
Email: [email protected]
ONG TERM INVESTMENT CALL
BUY 19 October 2011
Company Report | Q1FY12 Result Update
Wage hikes impact margins, but top line remains strong
HCL Technologies Ltd. (HCLT) reported mixed results for the first
quarter of the year. The company revenue crossed the USD 1 bn mark for
the quarter for the first time. The quarterly revenue has doubled over the
last three years.
Volume Growth: HCLT reported revenue of INR 46.51 bn which was up
by 25% and 8.2% on a YoY and a QoQ basis respectively. EBITDA for the
quarter stood at INR 7.9 bn, up 32% from the same quarter in the
previous year. PAT posted for the quarter was INR 4.9 bn, up 50% YoY
but marginally down by -2.7% QoQ. HCLT saw volume growth of 5.1%
this quarter. Price realization increased 1.2% QoQ. Offshore revenue
stood at 41.7%, and Onsite revenue stood at 58.3%. Utilization excluding
trainees was at 74.1%. If we include trainees, utilization was at 70.1%.
HCLT added 3,474 employees (net) in this quarter, taking the total
employee base to 80,520.
New deals in the quarter: HCLT has seen 12 new wins for the quarter
with the US and Europe driving the growth. The quarter saw strong
growth across the service lines with Engineering and R&D Servicesgrowing by 8.6% and Customer Applications and Infrastructure Services
growing at 7.3% and 5.8% respectively. The Retail & CPG and the
Manufacturing verticals also showed good growth of 12% and 8.2%
respectively. In constant currency terms the BFSI segment grew by 2.1%
QoQ, whereas the Telecom segment contracted by 2% QoQ. The EBIT
margins saw a decline in this quarter, by 120 bps to 14.3% but have been
less than projected by the company.
Positive growth outlook: HCLT is confident of acquiring greater market
share in the quarters moving ahead and is well positioned to do this. TheIT services space has seen an increase in churn rates at 50% QoQ and with
new long term contracts of peer companies coming up for renewal in the
second quarter, HCLT is looking to capitalize using their operation
efficiency and better pricing model. Although there are global macro
economic concerns, HCLT did not witness any considerable slowdown in
demand over the last quarter and financial services continue to look
strong. The next quarter will be extremely important for the company as
it looks to win important deals in the quarter which will have a
significant impact on the financial year moving ahead. HCLT expects
strong revenue growth in orders in the October-December quarter as it
taps new markets in Japan and Europe and seeks to benefit from contract
renewals due in the U.S.
Industry IT / ITES
CMP (INR) 401Target (INR) 495
Upside / Downside (%) 23.4%
52 week High/Low (INR) 528/360
Market Cap (INR bn) 27.67
3M Avg. Daily Volumes 1339.69
P/E (FY12 E) 12.6x
Shareholding Pattern (%)
Promoters
65%FIIs
21%
DIIs
6%
Others
8%
1 – Year Stock Chart
60
70
80
90
100
110
120
130
O c t
N o v
D e c
J a n
F e b
M a r
A p r
M a y
J u n
J u l
A u g
S e p
O c t
HCL Nifty
Stock Performance (%)
1 Month 3 Months 1 Year
HCLT 14.1% -11.6% 2.0%
NIFTY 0.7% -8.3% -15.6%
(INR in mn)
Particulars Actual Estimates
Total Income 46,513 45,623
EBIDTA 7949 7,789
Reported PAT 4,968 5,247
* Source: Bloomberg, Unicon Research
8/3/2019 HCL Technologies Ltd - Q1FY12 Result Update
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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.
Email: [email protected]
Consolidated Financials(INR in mn)
Particulars Q1 FY12 Q1 FY11 Y-o-Y Q4 FY11 Q-o-Q
Revenues 46,513.0 37,081.0 25% 42,995.0 8%
Direct Costs 31,871.0 25,346.0 26% 29,061.0 10%
Gross Profits 14,642.0 11,735.0 25% 13,934.0 5%
Gross Profit Margin 31.5% 31.6% -17 bps 32.4% -93 bps
SG&A 6693.0 5701.0 17% 5992.0 12%
EBITDA 7949.0 6034.0 32% 7942.0 0%EBITDA (%) 17.1% 16.3% 82 bps 18.5% -138 bps
Depreciation 1,178.0 1,064.0 11% 1,121.0 5%
Amortisation 131.0 185.0 -29% 167.0 -22%
EBIT 6,640.0 4,785.0 39% 6,654.0 -0.2%
EBIT (%) 14.3% 12.9% 137 bps 15.5% -120 bps
Foreign Exchange Gains/(Loss) (179.0) (655.0) -73% 83.0 -316%
Other Income 238.0 5.0 4660% 71.0 235%
Share of Income/(loss) of minority shareholders 3.0 (2.0) -250% 2.0 50%
Tax Provision 1,728.0 824.0 110% 1,699.0 2%
Tax Rate (%) 24.5% 15.1% 935 bps 25.6% -109 bpsPAT 4,968.00 3,313.00 50% 5,107.00 -3%
PAT Margin 10.7% 8.9% 175 bps 11.9% -120 bps
Diluted EPS (INR) 6.8 4.8 42% 7.0 -2.9%Source: Company, Unicon Research (Average Exchange Rate USD 1 = INR 46.41)
Outlook & Valuation:
The macro economic environment will have a significant impact on the future revenue of IT services companies in the
medium term. HCLT has adopted a fairly aggressive strategy in increasing its market share and thus has been able to
show greater volume growth as compared to its peer. This growth momentum may moderate to a certain extent moving
forward but the company will still show strong revenues due to increased market share. They are in the best position to
benefit from the depreciation of the INR v/s USD due to their low forex hedged position (~ USD 390 mn) as compared to
their peers. At CMP of INR 401, the stock is trading at P/E of 12.6x FY12E earnings which is at a discount as compared to
its peers. We believe the stock has a potential upside of 23.4% and hence recommend a BUY on the stock and maintain our
price target of INR 495.
8/3/2019 HCL Technologies Ltd - Q1FY12 Result Update
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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.
Email: [email protected]
Unicon Investment Ranking Methodology
Rating Buy Accumulate Hold Reduce Sell
Return Range >= 20% 10% to 20% -10% to 10% -10% to -20% <= -20%
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