Buy HCL at Rs 1955 and add on dips to Rs 1730 - Rs 1788 for Target of Rs 2111 in 1 quarter ::HDFC Sec, report

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In our Q1JY15 results review dated Oct 25, 2014, we recommended investors to buy HCLT on dips in the price band of Rs. 1338-1394 for a price target of Rs. 1616 over the next quarter. Thereafter the stock touched a low of Rs. 1450.4 on Dec 15, 2014 and subsequently touched a new high of Rs. 1923 on Feb 05, 2015. Currently, it is quoting at Rs. 1955. HCLT’s Q2JY15 results were above our estimates all on parameters. Broad based growth across verticals, services & geographies was a positive highlight of the quarter. Recommendation of bonus issue (1:1) further improved the sentiments. We present an update on the stock. Key highlights of Q2JY15 results: (US GAAP) • USD Revenue stood at US$ 1,490.8 mn, up 4% Q-o-Q, which was above estimates. In Constant Currency (CC), the growth stood at 6.2% (highest growth in the past 16 quarters). The growth was driven by robust growth in Software services, which grew by 4.4% Q-o-Q (first quarter of 4% plus sequential growth since Q1JY12, led by engineering services). The IMS vertical recovered, growing by 3.6% Q-o-Q (6.2% Q-o-Q growth in CC), after four quarters of moderate growth. In INR terms, revenues growth was higher, aided by rupee depreciation during the quarter. • EBITDA grew marginally by 9.1% Y-o-Y & 5.8% Q-o-Q, while EBITDA margins declined by 98 bps Y-o-Y & 11 bps Q-o-Q to 25%. Sequential margin contraction was due to cross currency headwinds and S&M investments. However, these were partly offset by rupee depreciation. • PAT growth stood at 28.3% Y-o-Y & 2.2% Q-o-Q. Y-o-Y growth was aided by higher other income (up 81.1%), forex gains & lower depreciation cost (down 41.1% Y-oY). Excluding the one off gains from sale of some physical assets in Q1JY15, the Q-o-Q PAT growth was better than our projections at 11.9%. Forex gains of Rs. 150 mn (Rs. 530 mn forex loss in Q1JY15) also supported sequential PAT growth. • EPS for the quarter stood at Rs. 27.3 vs. Rs. 21.4 in Q2JY14 & Rs. 26.8 in Q1JY15.

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http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3011209