The 49 reports from 17 analysts offering long term price targets
for HCL Technologies Ltd. have an average target of 1166.44. The consensus estimate
represents an upside of 23.63%
from the last price of 943.50.
Maintain BUY. Our TP is Rs 1,255 at 14x Dec-20E EPS (in-line with 5-yr avg multiple). We recently hosted HCL Techs (HCLT) CFO for investor meetings. The discussions covered organic business and Mode-3 strategy (esp. the recent product acquisition). HCLT has under-performed peers ~30% over the last two years on (1) Organic growth slowdown, with IMS slowing from 9% to 4% YoY, and (2) Balance sheet-heavy capital allocation strategy. HCLTs rev/PAT/OCF share in tier-1 IT has been steady at ~15%.
A Low-cost Call Option On Longevity And Higher Margins Contrary to our lukewarm stance earlier, we are turning structurally more positive on HCL Technologies (HCLT) post announcement of its purchase of seven select IBM IPs for US$1.8 bn on 7 December 2018. We believe this stance may be non-consensus. We also believe the cumulative investment of ~US$3.1bn in acquiring the IPs over the past two-and-a- half years to be the price of a low-cost call option on longevity and higher margins. At ~6x EBITDA (for the cumulative IP), we believe these acquisitions do not have much downside. But it opens up the potential for a large upside in terms of the enterprise software opportunity which has hitherto not been addressed...
HCL Technologies (HCLT) has announced that it has signed definitive agreement to acquire 7 software products from IBM for US$1,775 mn (including earn-out). HCLT would fund this acquisition largely through internal accruals and debt of US$300 mn. The acquisition is expected to be closed in mid-2019. The acquisition would add an incremental revenue of $625mn-$650mn to HCLT's Mode-3 solutions which currently has run-rate of ~US$1bn. HCLT has not clarified the ammortisation policy for this acquisition. we expect the payback to be in 6+ years. We expect the acquisition to add ~3.4%/6.2% to FY20/21 revenue and ~2%/4% to the...
of USD625mn in the first year of acquisition and USD650mn revenues in the second year for acquisition. This implies HCL Tech is valuing the acquired business at P/S of 2.8x. The acquired products have an EBIDTA margin of ~50% and the deal is likely to be cash EPS accretive by ~15%. HCL Tech expects to close the acquisition by mid CY2019 (2QFY20E) and 48% of the purchase consideration is expected to paid on closing date of the acquisition (~2QFY20E). A majority of the remaining payout is expected to be done post...
HCLT has moved beyond partnering with IBM to acquiring some of the latter's product IPs, which it believes are a reflection of its focus on the strategic segments and efforts to expand services to a gamut of clients across industries and markets. In this note, we highlight the key specifics of HCLT's announced deal with IBM.
HCLT announced a landmark deal with IBM for a total consideration of about US$1.8bn that would add incremental revenues of ~US$625mn after completion, with estimated EBIDTA margins of ~50%. The deal could also lead to an EPS accretion of about 5-10%. Following the announcement of the deal, the Street seems to be concerned about HCLT's ability to grow the matured IP assets and management's preference for large inorganic investments to drive future growth. Investors, at the moment, seem to prefer HCLT's peers...
Maintain BUY with TP of Rs 1,260 (15x Sep-20E). HCL Tech (HCLT) posted in-line revenue (IMS recovered) with slightly better operating performance. Guidance/margin unchanged, however outlook (ex-2 BFSI accounts) stronger with improved pipeline, wins and renewal cycle. Revenue came at USD 2,099mn, 3.0/10.5% QoQ/YoY in CC terms. EBIT margin stood at 20%, +29bps QoQ with INR depreciation and productivity gains (automation, utilisation) offset by wage increase and product seasonality impact.
HCL Technologies (HCLT) Q2FY19 result was in-line with our forecast. While revenue growth of 3% QoQ in CC was slightly lower than our forecast of +3.5%, EBIT margin improvement of 30bps QoQ to 20% was in-line. Further, EPS of Rs18.2,+5.6%/+16.2% QoQ/YoY was higher than our forecast aided by higher other income and lower taxes. FY19 guidance revenue growth of 9.5% to 11.5% in CC (8.2% to 10.2% in US$) and EBIT margin of 19.5%-20.5% has been maintained, in-line with our expectation. We factor FX rate of Rs70, vs. Rs68 earlier, for rest of FY19 and FY20. Given the slight miss on revenue growth, we tweak our FY19/20E revenue forecast (in US$) by -0.6%/2.8% and EPS by +3.8%/-2.9%. We now forecast FY18-20 revenue (US$)/EPS CAGR of...
HCL Tech reported good set of Q2FY19 numbers. The company reported healthy revenue growth mainly led by better performance in North America (geographically). Among verticals, retail & CPG (13% QoQ) and lifesciences & healthcare (3.2% QoQ) led the growth. The company has maintained its revenue guidance of 9.5-11.5% in constant currency and margin guidance of 19.5-20.5%for FY19E....
HCL Technologies Ltd.'s earnings met estimates in the quarter ended September even as its margins remained flat. Sequentially HCL Technologies registered 7% rise in consolidated sales to Rs 14860 crore for...
Organic Pick-up And Slowing Value Compression In IMS Beyond FY19 Positives HCL Technologies' (HCLT) 2QFY19 QoQ CC revenue growth of 3% was in line with our estimate. Of this, a little less than 2% came from organic means, slightly better than anticipated. HCLT is confident of ~3% CQGR over 2Q-4Q to deliver on its FY19 growth guidance (9.5%-11.5% in CC terms). While at the beginning of FY19 it indicated equal contribution from organic and inorganic means, it seems organic growth is running a tad faster - a positive. However, organic growth (5%7%) continues to lag peers like TCS (10%-11%) and Infosys (7%-8%) and will continue to be a valuation headwind. Growth in BFSI, Europe and application services has been weaker than peers because of specific weakness in two European BFS customers. They will continue to be a drag...
on USD revenues and PAT. Revenues came at USD2099mn were up 2.1% QoQ and above our estimates (USD2090mn). Constant currency growth for the quarter stood at 3% QoQ (Ple: 3.2%). Organic constant currency revenue growth for the quarter would be ~1.8% and rest owing to Actian acquisition consolidation and revenues from new IP deal signed in 1QFY19. Infosys/TCS delivered 4.2/3.7% constant currency organic revenue growth for 2QFY19 respectively. Hence, HCL Tech's organic growth continued to lag select Tier 1 peers (Infosys/TCS). BFSI vertical revenues were up 0.1% in constant...
Geographically, Americas saw a healthy 4.4% QoQ growth in USD terms, while Europe (-0.9% QoQ) faced some growth headwinds. Regards other operating metrics, voluntary TTM attrition rate rose to 17.1% (16.3%), which is a key negative, in our view. While utilisation rose to 86.7% (vs. 85.5% in 1QFY19), net headcount rose by >3,750 (>11,600 gross addition) taking the total...
HCL Tech's 3.0% qoq revenue growth in CC terms was in-line with our estimate. EBIT margins at 19.9% improved 20bps qoq due to INR depreciation (+90bps), utilization improvement (+80bps), wage hikes (-70bps), and increase in SG&A; expenses (-80bps). HCL Tech maintained its revenue growth (10.5%) and margin guidance (19.5% to 20.5%), but improved organic growth outlook by indicating larger contribution from organic means vs. earlier expectation of equal contribution from organic and in-organic means for FY19. HCL Tech indicated widened scope-of-work (volumes and breadth) are offsetting pricing erosion pains. Expects renewal pricing pains in FY20 to be relatively lower than in FY19....
23 October 2018 grew 3% QoQ in constant currency (CC), a tad above our expectation of 2.5%. However, Actian and new IP partnerships contributed almost 2pp implying organic growth of ~1% QoQ CC. EBIT margins at 19.9% expanded by 20bp, exactly in line with expectations. PAT at INR25b grew by 6% QoQ, below our estimate of 13% QoQ, primarily because of lower other income. Growth continued to be driven by acquisitions, whereas organic momentum remained as is. Weakness was exhibited in the verticals of Financial Services (2.3% YoY CC), Manufacturing (-3.9% YoY CC) and Telecom (-0.8% YoY CC). Amongst services, Application Services (1.8% YoY CC) and IMS (4.4% YoY CC) remained moderate as well. For the year, organic growth is expected to contribute a tad more than half the growth guidance.
Largely in-line numbers: HCL Tech reported a stable quarter with an in-line performance in USD revenue and EBIT margin during Q2FY2019. CC revenue growth was slightly below expectations at 3% q-o-q and 10.5% y-o-y, led by healthy growth in IMS services (2.5% q-o-q) and ERD business (6.3% q-o-q). On a reported basis, USD revenues grew by 2.1% q-o-q to $2,098.6 million...
HCLT reported USD revenue growth of 2.1% QoQ (CC growth of 3% QoQ) to USD 2,099mn (DCMe: 2,106mn) primarily driven by healthy growth in IMS & ERD services. INR revenue grew 7.1% QoQ to ` 148.6bn (DCMe: ` 147.7bn) helped by INR depreciation. EBIT margin improved 22bps QoQ at 19.9% (DCMe: 20.5%) helped by INR dep (+90bps), Productivity improvement (+80bps) which was partial offset by negative impact of Wage hike (-70bps), SG&A; expense (-50bps) and others (-30bps). PAT grew...
Funding structure: Around 48% / $852 million of the total deal will be paid at the close of the transaction (mid-2019 i.e June 2019) and the remaining amount of the purchase consideration will be paid after the end of a year. The acquisition will be financed largely through internal accruals and a debt of $300 million at close of the deal. The company had...
OPM fell 150 basis points to 23.3% which saw OP rise 7% to Rs 3237 crore. Other income grew 8% to Rs 325 crore. After providing for depreciation (up 11% to Rs 476 crore), PBT grew 7% to Rs 3066 crore....
