Buy HCL Technologies: Edelweiss Research
Edelweiss Research is bullish on HCL Technologies and has recommended buy rating on the stock.
Edelweiss Research report on HCL Technologies:
HCL Technologies’ (HCL Tech’s) Q3FY07 results were ahead of our expectations. Revenues for the quarter were Rs 15.7 bn, a growth of 7.6% Q-o-Q and 40.6% Y-o-Y. Reported net profit of Rs 3.3 bn (growth of 16.0% Q-o-Q and 72.0% Y-o-Y), does not take into account the ESOP and restricted stock units (RSU) charges. After providing for those charges, the net profit growth, at 16.0% Q-o-Q and 56.1% Y-o-Y, is encouraging. EBITDA margin increased by 120bps, with improved utilisation, SG&A scale benefits, and marginally better pricing. The BPO business’ strong performance, with 16.4% Q-o-Q growth and significantly improved EBITDA margins of 26.5%, is this quarter’s highlight. Further, with 49 clients under multi-service delivery deals (up from 45 in Q2FY07), we see HCL Tech garnering a higher share of these clients’ total spending.
The current quarter strongly indicates that HCL Tech is embarking on a higher-growth trajectory accompanied by improved profitability that seems sustainable. In our view, the independent business momentum in each of its three broad service lines (core IT software, infrastructure management, and BPO) serves to raise the consistency of delivering good quarterly growth performance, going forward. In addition, we like the fact that infrastructure management and BPO, currently contributing ~28% to revenues, are largely stable business lines. Moreover, the annuity-based revenues of these businesses are likely to minimise volatility in the company’s future quarterly performance.
Factoring in HCL Tech’s better-than-expected performance for the quarter and improved business outlook, we have revised our estimates; our revised EPS for FY07, FY08E, and FY09E estimates are Rs 16.6, Rs 20.5, and Rs 25.0 respectively (up 7.8%, 5.6% and 3.6% from our earlier FY07, FY08E and FY09E estimates, respectively). At CMP of Rs 302, the stock trades at a P/E of 14.7 and 12.1x for our FY08E and FY09E revised earnings, respectively. We see value in the stock at current levels and reiterate our ‘BUY’ recommendation.
Source :- Moneycontrol
Edelweiss Research report on HCL Technologies:
HCL Technologies’ (HCL Tech’s) Q3FY07 results were ahead of our expectations. Revenues for the quarter were Rs 15.7 bn, a growth of 7.6% Q-o-Q and 40.6% Y-o-Y. Reported net profit of Rs 3.3 bn (growth of 16.0% Q-o-Q and 72.0% Y-o-Y), does not take into account the ESOP and restricted stock units (RSU) charges. After providing for those charges, the net profit growth, at 16.0% Q-o-Q and 56.1% Y-o-Y, is encouraging. EBITDA margin increased by 120bps, with improved utilisation, SG&A scale benefits, and marginally better pricing. The BPO business’ strong performance, with 16.4% Q-o-Q growth and significantly improved EBITDA margins of 26.5%, is this quarter’s highlight. Further, with 49 clients under multi-service delivery deals (up from 45 in Q2FY07), we see HCL Tech garnering a higher share of these clients’ total spending.
The current quarter strongly indicates that HCL Tech is embarking on a higher-growth trajectory accompanied by improved profitability that seems sustainable. In our view, the independent business momentum in each of its three broad service lines (core IT software, infrastructure management, and BPO) serves to raise the consistency of delivering good quarterly growth performance, going forward. In addition, we like the fact that infrastructure management and BPO, currently contributing ~28% to revenues, are largely stable business lines. Moreover, the annuity-based revenues of these businesses are likely to minimise volatility in the company’s future quarterly performance.
Factoring in HCL Tech’s better-than-expected performance for the quarter and improved business outlook, we have revised our estimates; our revised EPS for FY07, FY08E, and FY09E estimates are Rs 16.6, Rs 20.5, and Rs 25.0 respectively (up 7.8%, 5.6% and 3.6% from our earlier FY07, FY08E and FY09E estimates, respectively). At CMP of Rs 302, the stock trades at a P/E of 14.7 and 12.1x for our FY08E and FY09E revised earnings, respectively. We see value in the stock at current levels and reiterate our ‘BUY’ recommendation.
Source :- Moneycontrol
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9:28 AM
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