We attended HCL Tech’s (HCLT) Analyst Meet ‘The Big Leap Forward’ and maintain our positive outlook on the company based on (1) leadership/growth premium in infra & engineering services, (2) improved growth/margin visibility, (3) strength in renewals, (4) robust deal momentum and (5) effective platform-leverage (DryIce). While technological shifts will disrupt on-premise ops (effort reduction leading to revenue shrinkage) towards greater cloud adoption, HCLT’s leverage in analytics & automations and strong win-rate is expected to contribute to its growth progression.
Valuation: They believe that HCLT’s revenue ask-rate of 1.7-2.9% CQGR in order to meet its annual guidance of 12-14% CC is not steep with Geometric consolidation expected post 3Q. They have factored US$ revenue/EPS CAGR at 12% FY16-18E; maintain BUY with TP of Rs910.