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HCL Technologies Ltd. (HCLT.BO) Rs412.20
Positive News Equity Research
IMS + EU + HC = AZN deal; reassures strength of deal wins for HCL
News
HCL Tech has announced that AstraZeneca has selected HCL as a strategic
infrastructure outsourcing partner in a deal spanning five years. HCL will
be responsible for managing AZN’s entire data centre network across over
60 locations globally, including hosting services (email, messaging etc.)
and transformation of AZN’s existing data centers into state-of-the-art
facilities. HCL will also help AZN implement hybrid cloud though server
virtualization, storage, and transformation.
Analysis
(1) The AZN deal shows signs of two catalysts playing out for HCL that we
highlighted in our Nov 24 note, “IMS business remains resilient, revenue
share rises; reiterate CL-Buy”. (a) Potential deal wins over next 6 months
would underscore HCL’s ability to win higher market share as clients
finalize IT budgets. (b) Stable revenue growth for HCL will be driven by
resilient IMS business; we forecast 29% CAGR in FY11-FY14E (additional
US$1bn over US$830mn as of FY11). (2) The AZN deal is from the EU,
which reaffirms our stance that the EU may be a long term revenue driver
for Indian offshoring companies as pressure on cutting costs increases. (3)
The AZN deal follows wins from Eli Lilly in July and Merck (US$500mn)
last year in the under-penetrated healthcare vertical. (4) Deal value is not
disclosed, but the tenure (5 year) and multi-location delivery (60 globally)
suggest that it may be a fairly large ticket size deal for HCL. (5) HCL may
have been able to grab deal share from MNC vendor IBM, which had won a
similar IMS deal from AZN in Nov. 2007 worth US$1.4bn, supporting the
increasing trend of market share shift from MNCs to Indian vendors. (6) We
expect revenues from the deal to start accruing from 1QFY13.
Implications
We reiterate our CL-Buy on HCL with a 12-m Director’s Cut-based TP of
Rs520, implying 26% upside. HCL is trading at 11.1X FY13E P/E, a 37%/26%
discount to large-cap peers/8-yr historical average, while offering sectorleading
23% EPS CAGR over FY11-FY14E. Risks: Tech spending slowdown.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HCL Technologies Ltd. (HCLT.BO) Rs412.20
Positive News Equity Research
IMS + EU + HC = AZN deal; reassures strength of deal wins for HCL
News
HCL Tech has announced that AstraZeneca has selected HCL as a strategic
infrastructure outsourcing partner in a deal spanning five years. HCL will
be responsible for managing AZN’s entire data centre network across over
60 locations globally, including hosting services (email, messaging etc.)
and transformation of AZN’s existing data centers into state-of-the-art
facilities. HCL will also help AZN implement hybrid cloud though server
virtualization, storage, and transformation.
Analysis
(1) The AZN deal shows signs of two catalysts playing out for HCL that we
highlighted in our Nov 24 note, “IMS business remains resilient, revenue
share rises; reiterate CL-Buy”. (a) Potential deal wins over next 6 months
would underscore HCL’s ability to win higher market share as clients
finalize IT budgets. (b) Stable revenue growth for HCL will be driven by
resilient IMS business; we forecast 29% CAGR in FY11-FY14E (additional
US$1bn over US$830mn as of FY11). (2) The AZN deal is from the EU,
which reaffirms our stance that the EU may be a long term revenue driver
for Indian offshoring companies as pressure on cutting costs increases. (3)
The AZN deal follows wins from Eli Lilly in July and Merck (US$500mn)
last year in the under-penetrated healthcare vertical. (4) Deal value is not
disclosed, but the tenure (5 year) and multi-location delivery (60 globally)
suggest that it may be a fairly large ticket size deal for HCL. (5) HCL may
have been able to grab deal share from MNC vendor IBM, which had won a
similar IMS deal from AZN in Nov. 2007 worth US$1.4bn, supporting the
increasing trend of market share shift from MNCs to Indian vendors. (6) We
expect revenues from the deal to start accruing from 1QFY13.
Implications
We reiterate our CL-Buy on HCL with a 12-m Director’s Cut-based TP of
Rs520, implying 26% upside. HCL is trading at 11.1X FY13E P/E, a 37%/26%
discount to large-cap peers/8-yr historical average, while offering sectorleading
23% EPS CAGR over FY11-FY14E. Risks: Tech spending slowdown.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
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