HCL Technologies Research Report By Angel Broking

HCL Technologies posted 4QFY2017 results better than expected. In US$ terms, the revenues came in at US$1,817mn (v/s US$1,810mn expected) v/s US$1,745mn in 3QFY2017, a qoq growth of 4.1%. On Constant Currency (CC) basis, company posted a 3.8% qoq growth. On the operating front, EBIT came in at 20.0% (v/s 20.1% expected) v/s 20.4% in 3QFY2017, a dip of 34bps qoq. Thus, PAT came in at 2,325cr (v/s `1,982cr expected) v/s `2,070cr in 3QFY2017, up 12.3% qoq. For FY’2018, revenues are expected to grow 10.5-12.5% in Constant Currency (CC) and EBIT Margin of 19.5-20.5%. We maintain our buy.

Quarterly highlights: In US$ terms, the revenues came in at US$1,817mn v/s US$1,745mn in 3QFY2017, a qoq growth of 4.1%. On Constant Currency (CC) basis, company posted a 3.8% qoq growth. On the growth front, USA posted a CC qoq growth of 5.3%, Europe posted a dip of 3.0% CC and ROW posted a CC qoq growth of 15.8%. In terms of verticals, Financial Services posted a CC qoq growth of 3.0%, Manufacturing posted a CC qoq growth of 6.3%, Life sciences & Healthcare posted a CC qoq growth of 0.1%, Public Services posted a CC qoq growth of 8.1%, while Retail & CPG posted a CC qoq growth of 2.1%. On the operating front, EBIT came in at 20% (v/s 20.1% expected) v/s 20.4% in 3QFY2017, a dip of 34bps qoq. Thus, PAT came in at 2,325cr (v/s Rs1,982cr expected) v/s Rs2,070cr in 3QFY2017, up 12.3% qoq.

Outlook and valuation: We expect HCL Tech to post a USD and INR revenue CAGR of 10.7% and 10.7% respectively over FY2017–19E. On the back of strong order book and given the attractive valuations, we recommend a Buy on the stock.