Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Upside to revenue growth possible
Use near-term disappointment
from flattish FY12 margin
guidance to add positions
4Q FY11F: Revenue growth of 4.2%; margin improvement as guided
We expect HCL Tech to deliver US dollar revenue growth of 4.2% q-q in
4Q FY11F along with a 140bps improvement in EBITDA margin.
Management commentary on FY12 margins will likely be keenly watched.
Raising volume growth expectations; moderating margin increases
In line with the company’s intention to reinvest excess margins generated
towards growth, we have moderated our EBITDA margin improvement
expectation from 120bps to 40bps to 17% over FY11-13F. Accordingly, we
have raised our revenue CAGR expectation for HCL Tech from 22.2% to
23.5% over FY11-13F. Our earnings forecasts decline marginally, by 2-
3%, over FY12 and FY13.
Action: Still trading at significant discount to peers; reiterate BUY
We like HCL Tech for its favourable growth skew, ability to win market
share, unutilised operating levers and best-in-class earnings growth (27%
over FY11-13F). We believe near-term disappointment from flattish margin
guidance should be used to add positions to the stock. HCL Tech trades
at 13.4x FY13F earnings, a discount of 20-30% to peers Infosys and TCS.
We maintain BUY, with a TP of INR620 based on 17x FY13F earnings.
Catalyst: Growth outperformance coupled with margin sustainability
We think upside triggers include sustainability of margins beyond FY11F,
along with revenue growth exceeding tier-1 peers. Any faltering in growth
or margins could delay a stock re-rating, especially since consensus
estimates factor in a margin improvement, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Upside to revenue growth possible
Use near-term disappointment
from flattish FY12 margin
guidance to add positions
4Q FY11F: Revenue growth of 4.2%; margin improvement as guided
We expect HCL Tech to deliver US dollar revenue growth of 4.2% q-q in
4Q FY11F along with a 140bps improvement in EBITDA margin.
Management commentary on FY12 margins will likely be keenly watched.
Raising volume growth expectations; moderating margin increases
In line with the company’s intention to reinvest excess margins generated
towards growth, we have moderated our EBITDA margin improvement
expectation from 120bps to 40bps to 17% over FY11-13F. Accordingly, we
have raised our revenue CAGR expectation for HCL Tech from 22.2% to
23.5% over FY11-13F. Our earnings forecasts decline marginally, by 2-
3%, over FY12 and FY13.
Action: Still trading at significant discount to peers; reiterate BUY
We like HCL Tech for its favourable growth skew, ability to win market
share, unutilised operating levers and best-in-class earnings growth (27%
over FY11-13F). We believe near-term disappointment from flattish margin
guidance should be used to add positions to the stock. HCL Tech trades
at 13.4x FY13F earnings, a discount of 20-30% to peers Infosys and TCS.
We maintain BUY, with a TP of INR620 based on 17x FY13F earnings.
Catalyst: Growth outperformance coupled with margin sustainability
We think upside triggers include sustainability of margins beyond FY11F,
along with revenue growth exceeding tier-1 peers. Any faltering in growth
or margins could delay a stock re-rating, especially since consensus
estimates factor in a margin improvement, in our view.
No comments:
Post a Comment