HCL Infosystems Initiating Coverage Report By Ventura

A major restructuring exercise underway at HCL Infosystems (HCLI) leads us to believe that gloomy days for HCLI could conclude by end-FY15. The transition from a loss-making manufacturing business to an asset-light services and distribution business will help the company arrest its revenue and profitability slide. We believe HCLI’s fortunes could turnaround with a 6% CAGR in revenues from FY14E-FY16 and lead to an estimated net profit of `201 crore in FY16E. We initiate coverage on HCLI as a BUY with a Price Objective of `83 (9.2x FY16 earnings). This represents a potential upside of ~75% over a period of 18 months. At the CMP of Rs. 47.7, the stock is trading at 7.4x and 5.3x its estimated earnings for FY15 and FY16, respectively.

Initiating Coverage- HCL Infosystems Ltd