Buy HCL Technologies: Indiabulls Securities

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Indiabulls Securities Research has upgraded HCL Technologies rating to buy from hold in its report dated November 6, 2009.

"HCL Technologies Ltd (HCL) reported sequential revenue growth of 3.8% to USD 630.1 million, including axon, on the back of 2.7% jump in volume. In rupee term the revenue grew by 4.2% qoq to Rs 30.3 billion owing to better realization. On margin front, EBIDTA margin increased 58 bps qoq to 22.7% on account of improved cost containment measures and favourable cross currency movement. We expect EBITDA margin is likely to decline 110 bps in FY10 to 21% owing to pricing pressure, decline in offshore revenue mix and increase in fixed price projects. At the CMP, the stock trades at a forward P/E of 16.9x for FY10. Besides, our DCF valuation suggests a fair value of Rs 351, assuming a 12.9% WACC and a 5% terminal growth rate. This provides an upside of 15% over the current market price of Rs 305.2, hence we update our rating from Hold to Buy, "says Indiabulls Securities Research.

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