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India Equity Research Reports, IPO and Stock News
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What’s the theme?
Uptick in discretionary IT spend and recovery in the European market will boost volume growth for HCL
Tech. Margin expansion through improving employee pyramid and scale efficiencies.
What will move the stock?
1) Strongest volume growth of ~5%QoQ, highest among peers in Q4FY11; 2) Outperformance in emerging
verticals like energy and utilities and retail; 3) High growth in Enterprise Application Services and Custom
Applications segments driven by discretionary spend; 4) Higher EBITDA margins in the near term supported
by higher offshoring and utilization; 5) Support to EBITDA margin due to improvement in employee pyramid
as last 4-5 quarters have seen huge lateral addition that is likely to be subdued going ahead; 6) Absence
of forex losses (cash flow hedges) will provide positive support to the bottom-line.
Where are we stacked versus consensus?
Our revenue estimates vary from consensus by ~(1)% for FY12 and for FY13 it is in line with consensus,
underpinned by stronger volumes and modest uptick in pricing. Our EBITDA margin forecast for FY12 and
FY13 is higher than consensus by 70bps and 20bps respectively. Our FY12 EPS estimate is in line with
consensus whereas for FY13 it is 1% higher than consensus.
What will challenge our target price?
1) Slower recovery in the US economy; 2) Appreciation of INR vs. USD and strengthening of USD against
EUR 3) Higher attrition and wage increments;
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s the theme?
Uptick in discretionary IT spend and recovery in the European market will boost volume growth for HCL
Tech. Margin expansion through improving employee pyramid and scale efficiencies.
What will move the stock?
1) Strongest volume growth of ~5%QoQ, highest among peers in Q4FY11; 2) Outperformance in emerging
verticals like energy and utilities and retail; 3) High growth in Enterprise Application Services and Custom
Applications segments driven by discretionary spend; 4) Higher EBITDA margins in the near term supported
by higher offshoring and utilization; 5) Support to EBITDA margin due to improvement in employee pyramid
as last 4-5 quarters have seen huge lateral addition that is likely to be subdued going ahead; 6) Absence
of forex losses (cash flow hedges) will provide positive support to the bottom-line.
Where are we stacked versus consensus?
Our revenue estimates vary from consensus by ~(1)% for FY12 and for FY13 it is in line with consensus,
underpinned by stronger volumes and modest uptick in pricing. Our EBITDA margin forecast for FY12 and
FY13 is higher than consensus by 70bps and 20bps respectively. Our FY12 EPS estimate is in line with
consensus whereas for FY13 it is 1% higher than consensus.
What will challenge our target price?
1) Slower recovery in the US economy; 2) Appreciation of INR vs. USD and strengthening of USD against
EUR 3) Higher attrition and wage increments;
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