Buy HCL Tech; target of Rs 520: Angel Broking

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Buy HCL Tech; target of Rs 520: Angel Broking

Angel Broking is bullish on HCL Tech and has recommended buy rating on the stock with a target of Rs 520 in its January 17, 2012 research report.

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Angel Broking is bullish on HCL Tech and has recommended buy rating on the stock with a target of Rs 520 in its January 17, 2012 research report.

"For 2QFY2012, HCL Technologies (HCL Tech) reported a modest set of numbers. The highlights of the result were the 4.9% qoq overall volume growth and 5.7% qoq onsite volume growth in core software services. The company signed 18 deals during the quarter, with total contract value of these deals being more than US$1bn. Management has indicated that deal bookings in CY2012 will be coming from deal renewals, which is indicated by TPI data - according to which ~US$47bn of restructuring deals are coming for renewals in CY2012. HCL Tech has been a beneficiary of the return in demand for enterprise services, and we expect it to ride on the spending on discretionary services."

"For 2QFY2012, HCL Tech reported revenue of US$1,022mn, up 2.0% qoq, on the back of 4.9% qoq volume growth. In INR terms, revenue came in at Rs 5,245cr, up by whopping 12.8% qoq, aided by INR depreciation. EBITDA and EBIT margins of the company expanded by 141bp and 156bp qoq to 18.5% and 15.8%, respectively, because of 260bp positive impact on account of INR depreciation during the quarter. PAT came in at Rs 573cr, negatively affected by Rs 76cr forex loss."

"Management is witnessing a strong demand environment and has signed 18 multi-year, multi-million dollar deals during the quarter, excluding contract renewals. Total contract value of these deals exceeds US$1bn. We expect HCL Tech to be the outperformer among tier-I IT companies, with USD and INR revenue CAGR of 16.3% and 22.3%, respectively, over FY2011-13E, on the back of its higher-value services portfolio, which is set to address the current demand landscape. EBITDA and PAT are expected to grow at a 20.0% and 22.1% CAGR over FY2011-13E. We maintain our Buy rating on the stock with a target price of Rs 520," says Angel Broking research report.

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To read the full report click on the attachment