HCL Technologies Ltd. share price target

Steady rise in margins a prequel to volatility ahead EBITDA% also stood at 20.8% in-line with our estimate of 20.7%, supported by INR depreciation and utilization improvement of 90bp qoq to 85.6%. Employee base increased to 104,896 with net additions of 1,200 compared to decline in the previous 2 quarters; LTM attrition rose to 17.3% (16.7% in OND quarter). Among geographies, Europe posted second consecutive quarterly decline at 2.4% qoq; Americas and RoW grew at 3.7% and 1.3% in 3Q. HCLT won 7 transformational deals during 3Q with TCV...

Last week, HCL Tech announced an agreement to acquire (through demerger) all of the business of Geometric Ltd, except for an 58% stake that Geometric owns in the JV 3DPLM Software Solutions Ltd, with Dassault Systems. HCLT would issue 10 equity shares of | 2 each to Geometric...

Firstly, the deal highlights the stress, most of the midcap IT services companies are going through, on the back of high vertical/client concentration and increasing competition even in small deals. Geometric had reported USD revenue CQGR of 1.2%...

In 9MFY16, GEOM (excluding 3DPLM)'s revenue totaled USD104m, and EBIT margin stood at 8.2%. Assuming continuity of the current revenue rate and EBIT margin sustainability at 13.5% in 3QFY16, the acquisition would add ~2%...

HCL Tech reported in-line quarterly earnings in 2QFY16, consolidated revenues grew by 11.4% YoY and 2.4% QoQ to Rs. 103.4bn. Constant currency terms, revenues grew by 9.3% YoY...

HCL Technologies (HCL Tech) reported better-than-expected results for 2QFY2016. It posted a sales growth of 1.4% qoq to US$1,566mn V/s an expected US$1,568mn. In constant currency (CC) terms, revenue grew 2.1% qoq. On the operating front, the EBITDA margin came in at 21.5% (V/s an expected 20.9%) an uptick of 58bp qoq. Consequently, the PAT came in at Rs1,920cr (V/s an expected Rs1,739cr), a growth of 5.3% qoq. On back of a strong order book, the company expects 2HFY2016 to be better than 1HFY2016. We maintain our Buy recommendation on the stock with a price target of Rs1,038. Quarterly highlights: The company has reported better-than-expected results for the quarter. It posted a sales growth of 1.4% qoq to US$1,566mn V/s an expected US$1,568mn. In constant currency (CC) terms, revenue grew 2.1% qoq. In CC terms, the key geography which drove sales was Americas, which grew 5.5% qoq; while Europe and ROW posted a dip of 2.4% qoq and 3.4% qoq, respectively. On the operating front, the EBITDA margin came in at 21.5% (V/s an expected 20.9%) an uptick of 58bp qoq. Consequently, the PAT came in at Rs1,920cr (V/s an expected Rs1,739cr), a growth of 5.3% qoq. On the productivity...

Outlook and valuation: We maintain our neutral stance on cannibalisation of its IMS revenues its largest source of incremental growth over the last three years by aggressivecloudserviceproviderssuchasAWSandIBM.Lackofasimilargrowthengine...

Background: HCL Tech is the 4th largest IT services exporter offering offshore IT Services. 2QFY16: Revenue split: North America: 61%, Europe: 29.9% & ROW: 9.1%. Service Mix: Application development & maintenance: 40%, Infrastructure Services: 36%, Engineering and R&D; services: 18.6%, Business process management: 5.5%. Revenue share by industry Mix: Manufacturing: 31.5%, BFSI: 25.90%, Retail & CPG: 9.5%, Life Science & Healthcare: 12.2%, Public Services: 10.6%, media & Entertainment: 9.7% and others: 0.6%. Fixed Price Contracts account for 57%, Time & Materials: 43%. Top 5 client accounts: 13.6%, Top 10 clients: 21.7% and top 20...

EBIT% target band of 21%-22% seems tad optimistic Operating performance was in-line with EBIT% at 20% (RSec est. 19.8%), +65bp qoq. Margin in 2Q was supported by one-off in BPO business (+40bp impact estimated) based on normalized BPO margins of 10%. HCLT maintained its target EBIT% band at 21% to 22% for 2HFY16E; our estimates are conservative on the margin with 20.6%/20.1%/20.1% for 2HFY16E/FY17E/18E, respectively. PAT was higher at...