HCL Technologies Ltd. share price target

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...

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...

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...

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.

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....