HCL Technologies - 1QFY2018 Result Update - Angel Broking

For 1QFY2018, HCL Tech posted results below expectations on sales front, while EBIT and net profit came in higher than expected. The sales came in at US$1,884mn (v/s. US$1,891mn expected) v/s. US$1,817mn in 4QFY2017, a qoq growth of 3.7% qoq. Revenue in Constant Currency (CC) terms was up 2.6% qoq. The EBIT margin came in at 20.1% (v/s. 19.5% expected) v/s. 20.0% in 4QFY2017, a qoq expansion of 8bps. Thus, PAT came in at Rs. 2,171cr (v/s. Rs. 2,101cr expected) v/s. Rs. 2,325cr in 4QFY2017, a qoq dip of 6.6%. In terms of guidance, the company has re-iterated that FY2018 revenues are expected to grow between 10.5-12.5% in CC, while Operating Margin (EBIT) is expected to be in the range of 19.5-20.5%. We maintain our Buy rating.

Quarterly highlights: The sales came in at US$1,884mn (v/s. US$1,891mn expected) v/s. US$1,817mn in 4QFY2017, a qoq growth of 3.7% qoq. Revenue in Constant Currency was up 2.6% qoq. The growth in terms of geography was driven by the USA and ROW, which posted a qoq CC growth of 3.8% and 3.1% respectively. Europe on the other hand posted a CC qoq dip of 0.4%. In terms of the services, it was Engineering and R&D Services which posted a CC qoq of 7.9%. In terms of verticals, the financial services posted a qoq CC growth of 5.3%; Life sciences & Healthcare posted a qoq CC growth of 4.8%, while Retail & CPG posted a qoq CC growth of 4.9%. On the operating profit front, the EBIT came in at 20.1% (v/s. 19.5% expected) v/s. 20.0% in 4QFY2017, a qoq expansion of 8bps. Thus, PAT came in at Rs. 2,171cr (v/s. Rs. 2,101cr expected) v/s. Rs. 2,325cr in 4QFY2017, a qoq dip of 6.6%.

Outlook and valuation: We expect HCL Tech to post a USD and INR revenue CAGR of 10.7% and 10.7% respectively over FY2017-19E. On the back of strong order book and given the attractive valuations, we recommend a Buy on the stock.

Shares of HCL TECHNOLOGIES LTD. was last trading in BSE at Rs.874.55 as compared to the previous close of Rs. 883.7. The total number of shares traded during the day was 40394 in over 2513 trades.

The stock hit an intraday high of Rs. 885.8 and intraday low of 871.3. The net turnover during the day was Rs. 35396076.

Source : Equity Bulls

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