Views on HCL Technologies 1QFY2016 Results: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - IT, Angel Broking) on HCL Technologies 1QFY2016 Results:

"HCL Tech, posted results just in line with expectations, while EBIT margins came ahead of expectations. On sales front, the company posted a 0.5% sequential growth in USD revenues to US$ 1,545mn V/s US$ 1,547mn expected. On Constant currency (CC), the company posted a 1.2% qoq rise in sales. In rupee terms, revenues came in at INR 10,097cr V/s INR 10,085cr expected, up 3.3% qoq.

In terms of geography, US grew by 0.7% qoq CC growth; Europe grew by 5.6% qoq CC growth. In ROW de-grew by 8.4% qoq CC growth. In terms of services, it was a broad based growth across all revenue segments driven by Engineering and R&D Services at qoq CC 3.6%, Business Services at qoq CC 2.4%, and Infrastructure Services at qoq CC 0.9%. In terms of verticals, it was Financial services posted a qoq CC growth of 1.9%, Manufacturing posted a qoq CC growth of 0.5%, Life Sciences & Healthcare posted a qoq CC growth of 4.3%, Public Services posted a qoq CC growth of 4.9%, Retail & CPG posted a qoq CC growth of 1.4% and Telecommunications, Media, Publishing & Entertainment a qoq CC growth of 1.0%.

On the operating front, the EBIT margins came in at 20.5% V/s 19.1% expected and 20.2% in 1QFY2016, a qoq contraction of ~111bps. However, after adjusting for US$ 18.4mn provision for the client; the EBIT margins came in at 19.4%. Consequently, Adj. PAT came in at INR 1,726cr V/s INR 1,741cr expected a dip of 2.3% qoq. However, Ex Adjustment PAT came in at INR 1,823cr.

On the operating front, the utilization rate came in at 83.6% V/s 83.5% in 1QFY2016 while the attrition rate came in at 16.3% V/s 16.5% in 1QFY2016. Strong client addition in the quarter continued: US$ 50mn + clients up by 1, US$ 30mn + clients up by 3, US$ 20mn + clients up by 2. Overall, the company has won 10 Transformational engagements during this quarter in excess of US$ 1bn in TCV.

The stock has witnessed a huge correction post warning for a few soft quarters; however we believe that the stock has corrected significantly and hence we recommend a BUY rating with a price target of INR 1,132."

Shares of HCL TECHNOLOGIES LTD. was last trading in BSE at Rs.864.95 as compared to the previous close of Rs. 857.15. The total number of shares traded during the day was 203039 in over 7546 trades.

The stock hit an intraday high of Rs. 868.8 and intraday low of 849. The net turnover during the day was Rs. 175136607.

Source : Equity Bulls

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