Please Share::
India Equity Research Reports, IPO and Stock NewsVisit http://indiaer.blogspot.com/ for complete details �� ��
HCL Technologies
Investment case: We remain negative on HCL Tech as we expect the stock to
be less defensive in a downturn given its lower margin resilience and relatively
weaker balance sheet compared to peers. In addition, we expect a period of
potential sluggishness in demand by early 2012, which could cause downgrades
to FY13 outlook. We expect HCL Tech’s operating margin to remain low, with
the senior management indicating increased expenditure on sales and marketing
in the next few quarters. We think the company needs to consistently spend
more on sales and marketing in order to sustain revenue growth. We remain
cautious given our concern about a potential tradeoff between margins and
revenue growth.
Valuation: We derive our price target from a DCF-based methodology and
explicitly forecast long-term valuation drivers using UBS’s VCAM tool,
assuming a WACC of 12.4% and a terminal growth rate of 3%. Our price target
implies a one-year forward PE multiple of 15.7x, which we believe is reasonable
given the lower margin profile.
2012 Catalysts: 1) Increased investment in client-facing activities that will
manifest itself in the form of higher SG&A is likely to impact margins; and 2)
continuing negative newsflow in developed economies is likely to impair 2012
IT services budgets and pose significant downside risk in the near term.
read details and other companies in list (click link below)
UBS India – Outlook 2012 ::Most & Least Preferred Stock Ideas for 2012
No comments:
Post a Comment