HCL Technologies Q2FY12 First Cut - Maintain 'BUY' - Quick Bite - PINC Research

"In-line performance, forex loss hit profit"

Software Services' volume grew 4.9%QoQ and its pricing declined 1%QoQ. BPO remained flattish. IMS declined 3%QoQ impacting the overall revenue growth. Despite lower outstanding hedges, the forex losses were huge which impacted PAT. Results are broadly in line at the top-line but lower margin performance and huge forex losses have impacted PAT. However, a positive element was growth in the US where Infosys lagged.

- In-line revenue growth
- Strong growth in US; RoW and IMS declines
- Robust growth in manufacturing and financial services
- Top 5 clients grow; 2 new clients in USD100mn+
- Marginal decline in utilisation

VALUATIONS AND RECOMMENDATION

The expectations are low and the financial performance has been inline soothing the concerns that HCL Tech's margin is likely to dip drastically due to undercutting. HCL Tech trades at 30% discount to Infosys on FY13 PER multiples. At the CMP of Rs406, the stock is trading at 11x FY13E EPS. Maintain 'BUY' recommendation on the stock with a target price of Rs470 based on 13.5x FY13E EPS.

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 0.86 lakhs.

Source : Equity Bulls

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