HCL Tech Q2 PAT seen up 5.3% at Rs 523 cr

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HCL Tech Q2 PAT seen up 5.3% at Rs 523 cr

HCL Technologies is expected to report a profit after tax of Rs 523 crore in the second quarter of FY12, a growth of 5.3% as compared to Rs 496.7 crore in previous quarter.

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HCL Technologies is expected to report a profit after tax of Rs 523 crore in the second quarter of FY12, a growth of 5.3% as compared to Rs 496.7 crore in previous quarter.

Revenues are likely to go up by 12.8% to Rs 5,245 crore from Rs 4,651.3 crore during the same period.

EBITDA is seen going up at Rs 950 crore in the quarter ended December 2011 versus Rs 794.9 crore in previous quarter.

Q2 Highlights

Dollar revenues at around 2.3% seen towards the lower end of tier 1 band due to higher cross currency
>28% exposure to GBP/Euro - will result in cross currency hit of around 150-200 basis points
>Last quarter volume growth of around 4%, lagged TCS (6.25%) and Infosys (4.5%); even dollar revenues growth at 4.07%, lagged TCS (4.7%) and Infosys (4.5%)
>Off late HCL Tech has been finally balancing revenues growth + margins. so even in last quarter, it was no longer had industry leading revenues growth but saw margin improvement that was higher than expectations. 

Margin benefit of only around 100 basis points (lesser than peers, e.g. Infosys margins up around 300 basis points)
>Rupee benefit partly offset by partial impact of special milestone payouts to employees + wage to seniors. Cash rewards of USD 5 million given to employees when the company crossed the milestone of USD 1 billion in a quarter (50 bps) and senior-level promotions (50 bps)
>Margin increase could be limited further if the company re-invests currency benefit to grow biz
>Street sees EBITDA margin stability between 17-18%,
>Management expects to maintain EBIT margins YoY in FY12 at around 14%

Also watch out for pricing - fear on the street is that HCL Tech ((along with Cognizant, Wipro)) might reinvest currency gains to focus on volumes resulting in predatory pricing.