HCL Technologies - First Cut: In-line quarter with better outlook - Prabhudas Lilladher

HCL Technologies reported Q2FY12 results in-line with our expectation but ahead of consensus estimates, with revenue growth of 2% QoQ is USD terms for Q2FY12. The margin performance was ahead of consensus estimates. Onsite volume growth of 4.2% QoQ in a seasonally weak quarter is encouraging. We expect uptick in stock price, as the result was better than consensus expectations.

HCLT Q2FY12 results – In‐line with our, but better than consensus estimates: HCLT revenue grew by 12.8% QoQ to Rs52.5bn for Q2FY12 (PLe Rs52.1bn, Cons: Rs52.0bn) in INR term, whereas revenue in USD terms grew by 2% QoQ to $1,022mn (PLe: $1,025mn). EBITDA margin expanded by 141bps (PLe: 211bp, Cons: 81bp) QoQ to 18.5%. The company reported EPS of Rs8.31 (PLe: Rs8.63, Cons.: Rs7.97), a growth of 15.2% QoQ.

Geography, Services and Verticals – US, R&D Services, EAS and Retail shine: Revenue for US and Europe grew by 7.4% and 2.3% QoQ respectively. In terms of services, R&D Svcs and Enterprise Application grew by 3.6% and 4.5% QoQ respectively. Retail and Hi-Tech grew by 5.6% and 3.7% QoQ respectively.

Volume growth steady and pricing dipped, attrition spiral-down, Strong client addition: The pricing declined by 1% QoQ (onsite: -1.4%, offshore: -1.2%) whereas volume growth was 4.9% (onsite: 5.7%, offshore: 4.6%). The company hired 6017 lateral employees (Q1FY12: 6170) for the quarters and added 57 new clients (Q1FY12: 66, Q4FY11: 70) in Q2FY12. Attrition spiraled down to 15.7% (from 15.9% previous quarter)

The HCL Technologies stock closed the day at Rs.424.75, up by Rs.18.70 or 4.61%. The stock hit an intraday high of Rs.432.25 and low of Rs.415.

The total traded quantity was 4.21 lakhs compared to 2 week average of 0.52 lakhs.

Source : Equity Bulls

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