HCL Tech margins unsustainable; guidance aggressive: Kotak

Brokerage house Kotak Securities has retained its bearish call on HCL Technologies, citing unsustainable profit margins and risky revenue model as the main reasons.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead Realasset
moneycontrol.com

Home » News » Markets » Market news

Apr 18, 2013, 08.03 PM | Source: Moneycontrol.com

HCL Tech margins unsustainable; guidance aggressive: Kotak

Brokerage house Kotak Securities has retained its bearish call on HCL Technologies, citing unsustainable profit margins and risky revenue model as the main reasons.

Like this story, share it with millions of investors on M3

HCL Tech margins unsustainable; guidance aggressive: Kotak

Brokerage house Kotak Securities has retained its bearish call on HCL Technologies, citing unsustainable profit margins and risky revenue model as the main reasons.

Post Your Comments

Share Cancel

Moneycontrol Bureau

Brokerage house Kotak Securities has retained its bearish call on HCL Technologies , citing unsustainable profit margins and risky revenue model as the main reasons.

In its report reviewing the company’s March quarter earnings , Kotak analysts Kawaljeet Saluja, Rohit Chordia, and Shyam M. have termed the management’s margin guidance of 18-19 percent  as being “aggressive.”

Extracts from the Kotak report:

"Growth without/or marginal people addition has been the hallmark of HCLT’s performance for past the few quarters. HCLT’s per person revenue productivity is now 13-25% higher than other Tier-1 IT even as the reported offshore pricing is lower than peers."

Reading between the lines, it is evident that the Kotak team is skeptical of the numbers.

"We are surprised with HCLT’s high profitability and the near convergence
with Wipro. That HCLT has lower offshore pricing (16-18% lower than Infosys and Wipro), inefficient employee pyramid captured by delay in absorption of freshers, higher subcontracting costs (at least 2 times of peers) and growth that is driven by relatively lower-margin infra management business raises concerns on sustainability. We find management guidance of margins aggressive
."

And, the stock is not cheap either, say the trio.

"Revenue growth that is single-service driven, stretched operating metrics with unsustainable profitability and sticky attrition numbers raise the risk profile of the business. Valuations at 14 times FY2014(estimated) earnings are not inexpensive either."

 

Ads by Google

Buy, Hold, Sell ? Hear it first on M3
HCL Tech margins unsustainable; guidance aggressive: Kotak

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login