Visit http://indiaer.blogspot.com/ for complete details Bottom quarter done; play the spike
In-line with our estimates; deal flow gets thicker and faster
HCL Tech numbers came in precisely in-line with our expectations on
margins and bottom-line. In congruence with our view for the quarter,
SAP practice of Axon seems to have led the growth. Most of the
current strength in numbers is coming from a comeback of financial
services, cost optimization programs in the IMS space and
implementation/consolidation in the ERP space. Though the TCVs for
the 14 "major" deals were not disclosed in the call, we sense from the
management comments that the deals in the quarter and more
importantly, the deal pipeline for the next quarter is more robust than
most of our other coverage universe stocks.
Holding back on bullets; expect the margin uptick from here on
While HCL Tech has been consistently delivering industry leading
topline growth, it has been holding back on almost all of the margin
levers of utilization, SG&A spend and pyramid structure for delivery.
While management has guided for a flat margin for the next quarter
we will model a gradual improvement in margins from the next
quarter to moving to around 18.4% levels in Q4FY11. Going forward,
in FY12, we expect the company to use more of its margin levers.
BPO turnaround on track; breakeven likely in another 2 quarters
BPO topline has grown qoq for the first time in six quarters by 6.7%.
EBITDA margins have moved on a qoq basis from -11.4% to -8.7%.
While earlier BPO was largely voice based in telecom and insurance,
now BPO is decidedly moving towards financial services and logistics
with transformational multi geography deals now coming into play.
Upping FY12 estimates; upping target price to INR 460
While we are already aggressive on the FY11 topline and bottomline
estimates, we now upgrade both our topline and bottomline estimates
materially for FY12. We now put our target price at INR 460 for
HCLTech. At FY12 numbers, our FY12 TP implies a multiple of 14.8x
(against 18.6x on our Infosys target price of INR2,706)
No comments:
Post a Comment