How have IT stocks performed? Kotak PCG answers

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How have IT stocks performed? Kotak PCG answers

Dipen Shah of Kotak PCG says that Geometric Software's results were pretty much below expectations. He further adds that though on the topline they did show 10% QoQ growth, the margin impact was much higher than what they had anticipated.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Key takeaways from HCL Tech's conference call Zensar Tech Q2 net profit at Rs 4.43cr Aztecsoft can touch Rs 190 Stay invested in frontline IT stocks ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Geometric | HCL Technologies | Infosys | Aztecsoft | Tata Consultancy Services |

So we believe that  Zensar Technologies has been improving its client profile, it has been mining deeper, there is more stability, which has come into the revenue growth of Zensar over the last couple of quarters. We see adequate levers, which the company has for improving the profitability, going forward. So in terms of Zensar we had a positive bias. We do continue to be positive, our price target as of now stands at Rs 284.

Q: What do you make of HCL Technologies numbers and what sort of earnings would you set out?

A: The results of HCL Technologies  were once again very much in line. On the operational front, the EBITDA was as we had expected. The only difference, if we have to talk in terms of the bottomline, has been the higher other income and the lower taxation. These are very micro numbers. But overall, we have a positive bias on HCL Tech.

The company has been adding several large accounts. The company's transformational strategy has been working out. We can see that these accounts, which the company has added over the past few quarters have started ramping up, though the pricing has not been going up significantly as compared to its peers.

We remain comfortable with the existing revenue, our existing projections and the valuations. Looking at PE or earnings, we have a Rs 38 EPS as of now for HCL Tech, and the price target would be about Rs 700. 

Q: What is your call on TCS ?

A: The results were in line. Though I need to say that the headline numbers look above expectations. 8% revenue growth was very much there though it has been impacted to a certain extent by offshore.

The important point is the 300 bps improvement in the margins. But if we understand correctly from yesterday's conference call there was a one-time component write back of about Rs 35 crore in this EBITDA and also the provisions had gone down significantly.

So these are the kind of figures, which we had not anticipated and probably could be one time. To that extent, if we adjust the earnings per share, it was very much in line. However, Infosys Technologies and TCS have made encouraging remarks about the macro picture.

There is no impact whatsoever of the slowdown, which is currently undergoing in the US. Also TCS' comments on billing rates were to our surprise. So just because of improvement in the macro picture, and just because of no impact as of now due to the US slowdown, we tend to get more positive on TCS also and have suitably upgraded our estimates and targets.

Disclosures:

We have reports on that and our clients as well as our PMS department maybe having positions in these stocks.