Accumulate HCL Tech; target of Rs 495: Unicon Investment

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Accumulate HCL Tech; target of Rs 495: Unicon Investment

Unicon Investment is bullish on HCL Tech and has recommended accumulate rating on the stock with a target of Rs 495 in its January 17, 2012 research report.

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Unicon Investment is bullish on HCL Tech and has recommended accumulate rating on the stock with a target of Rs 495 in its January 17, 2012 research report.

"HCL Technologies Ltd. (HCLT) reported strong results for the second quarter of the year. The company posted a top line and bottom line that was above Unicon's quarterly estimates. For the quarter, EBITDA margins at 18.5%, increased by 217 bps YoY and 141 bps QoQ."

"HCLT reported revenue of INR 52.45 bn which was up by 35% and 12.8% on a YoY and a QoQ basis respectively. EBITDA for the quarter stood at INR 9.7 bn, up 53% YoY and 22% QoQ. PAT posted for the quarter was INR 5.7 bn, up 43% YoY and 15.3% QoQ. HCLT saw volume growth of 4.9% this quarter. Price realization remained constant in the quarter. Offshore revenue stood at 42.1%, and Onsite revenue stood at 57.9%. Utilization excluding trainees improved to 76.1% compared to 75% YoY. If we include trainees, utilization was at 69.61%. HCLT added 2,566 employees (net) in this quarter, taking the total employee base to 83,076. HCLT has won 18 new multi-million dollar deals in the quarter. The total contract value for these 18 deals exceeds USD 1 bn. The Americas and Europe have driven growth this quarter and have grown by 7.3% and 6.3% respectively. The company added 57 new clients in the quarter, which is a good number considering the fact that Oct-Dec quarter is considered to be a relatively slow quarter. The total number of active clients is currently at 516. HCLT also added 2 new 100 million + clients in the quarter."

"The quarter saw strong growth across the service lines with Enterprise Application Services at 6.5%, Custom Application Services at 5.4% and Engineering and R&D Services growing at 4.0%. Infrastructure Services was marginally down QoQ but grew 23.1% YoY. The company witnessed strong growth across verticals led by Healthcare at 16.9%, Retail & CPG at 7.8%, Financial Services at 6.1% and Manufacturing at 4.6%"

"The uncertain economic environment in Europe and US will continue to be a concern for all IT players. HCLT's aggressive strategy now sees them challenging the larger IT players for major deals across the world. The company continues to increase its market share both qualitatively and quantitatively by leveraging its multi-service capability. At CMP the stock trades at 11.5x FY13E earnings. Considering the strong fundamentals and inherent strength to capitalize on larger deals and garner greater market share, we maintain our price target of INR 495 and recommend an ACCUMULATE rating on the stock," says Unicon Investment research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment