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UBS Investment Research
First Read: HCL Technologies
4 Q largely in line
Revenue slightly below estimates, margins in line
HCL Tech reported revenue of US$963m, up 5.3% QoQ and lower than our
estimate of US$980mn. This was led by 4.3% QoQ growth in IT services and
10.5% in infrastructure services. EBITDA margins improved by 120bp to 18.5% vs
our est. of 18.3% and in line with management guidance. BPO was down 4.4%
QoQ. IT services volumes at 3% QoQ were lower than our estimate of 5.8%.
Pricing remained stable, vs. the declines seen in other large vendors. Net profit
was up 11.9% to Rs4.9bn, 3% ahead of our estimate on higher forex gains.
Growth broad-based across client locations and industry verticals
Both US and Europe grew well, reporting over 5.5% QoQ growth. This is in line
with the trends seen in TCS. Financial Services grew 4.5% QoQ, slower than the
last 3 quarter, while manufacturing picked up momentum at 8% QoQ growth.
Telecom weakened, declining 7% QoQ, in line with the trend seen in Infosys.
Consensus upgrades unlikely, await management commentary
4Q FY11 results were in line with consensus, and we do not expect meaningful
upgrades on the back of these numbers. We believe that the key positive surprise
led by margin improvement in 2H FY11 is already factored into consensus
estimates and FY12 margin outlook will be critical to stock price movements. We
await management commentary on margins and wage pressure in the call
scheduled at 17:30 IST today (+91-22-6629-0425 / +91-22-3065-0425).
Valuation: positives fully priced in, maintain Sell
We are reviewing estimates. Our PT is based on DCF.
HCL Technologies
HCL Tech is a leading Indian IT Services company with US$2.2bn revenue and
around 55,000 employees in FY09. The company focuses on technology and
R&D outsourcing and provides technology development services (development,
redevelopment and maintenance of software); enterprise application services;
infrastructure services; and BPO.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
First Read: HCL Technologies
4 Q largely in line
Revenue slightly below estimates, margins in line
HCL Tech reported revenue of US$963m, up 5.3% QoQ and lower than our
estimate of US$980mn. This was led by 4.3% QoQ growth in IT services and
10.5% in infrastructure services. EBITDA margins improved by 120bp to 18.5% vs
our est. of 18.3% and in line with management guidance. BPO was down 4.4%
QoQ. IT services volumes at 3% QoQ were lower than our estimate of 5.8%.
Pricing remained stable, vs. the declines seen in other large vendors. Net profit
was up 11.9% to Rs4.9bn, 3% ahead of our estimate on higher forex gains.
Growth broad-based across client locations and industry verticals
Both US and Europe grew well, reporting over 5.5% QoQ growth. This is in line
with the trends seen in TCS. Financial Services grew 4.5% QoQ, slower than the
last 3 quarter, while manufacturing picked up momentum at 8% QoQ growth.
Telecom weakened, declining 7% QoQ, in line with the trend seen in Infosys.
Consensus upgrades unlikely, await management commentary
4Q FY11 results were in line with consensus, and we do not expect meaningful
upgrades on the back of these numbers. We believe that the key positive surprise
led by margin improvement in 2H FY11 is already factored into consensus
estimates and FY12 margin outlook will be critical to stock price movements. We
await management commentary on margins and wage pressure in the call
scheduled at 17:30 IST today (+91-22-6629-0425 / +91-22-3065-0425).
Valuation: positives fully priced in, maintain Sell
We are reviewing estimates. Our PT is based on DCF.
HCL Technologies
HCL Tech is a leading Indian IT Services company with US$2.2bn revenue and
around 55,000 employees in FY09. The company focuses on technology and
R&D outsourcing and provides technology development services (development,
redevelopment and maintenance of software); enterprise application services;
infrastructure services; and BPO.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates
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