Apr 18, 2013, 02.43 PM IST
Brokerage house Kotak Securities has retained its bearish call on HCL Technologies, citing unsustainable profit margins and risky revenue model as the main reasons.
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
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."
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