HCL Technologies beats Street estimates; 10 takeaways from Q4 results

Net Profit:

HCL Technologies Ltd reported 20.8 percent year-on-year (YoY) growth in net profit to Rs 2325 crore for the quarter ended March 31, compared with a CNBC-TV18 poll of 2071 crore. The profit grew by 12.3 percent sequentially.

Rupee revenue grew by 2 percent on a quarter-on-quarter (QoQ) basis to Rs 12,053 crore and 12.7 percent on a YoY basis.

Dollar Revenue:

HCL Technologies Ltd reported 4.1 percent QoQ growth in dollar revenue to $1817 million for the quarter ended March 31, higher than a CNBC-TV18 poll of $1815 million. The dollar revenue grew by 14.5 percent on a YoY basis.

Dividend:

The Board of Directors has declared an interim dividend of Rs 6 per equity share of Rs 2 each of the company for the Financial Year 2017-18. The Board of Directors has fixed May 25 as the Record Date for determining the entitlement of the shareholders. The Payment date of the said interim dividend shall be June 2.

FY18 Guidance:

The FY18 revenues are expected to grow in the range of 10.5 percent to 12.5 percent in Constant Currency terms, in line with a CNBC-TV18 estimate of 11-13%. The above constant currency guidance translates to 9.9 percent to 11.9 percent in USD terms based on March 31, 2017 rates.

FY18 expected Operating Margin (EBIT) range is from 19.5 percent to 20.5 percent. The Operating Margin guidance assumes USD-INR currency rate of $1=Rs. 65.5 and other currencies at FY’17 average exchange rates.

Growth across all segments:

Americas and Europe grew by 14.8 percent and 15 percent respectively, driven by infrastructure services at 27.4 percent, engineering and R&D services at 11.7 percent and application services at 5.9 percent.

Vertical growth led by public services was at 31.3 percent, retail & CPG at 21.4 percent, manufacturing at 17.0 percent, life sciences & Healthcare at 11.1 percent, telecommunications, media, publishing & entertainment at 5.8 percent and financial services at 4.9 percent.

Deal Wins:

During the quarter, HCL signed eight transformational deals, representing a well–balanced mix of service lines, industry verticals and geographies, said the HCL note.

This takes the total number of transformational wins to 42 for FY’17. HCL continues its momentum on winning transformational deals with blue–chip customers, powered by its differentiated Mode 1–2–3 strategy.

Tax Expenses:

Tax expenses reduced from Rs418.88 crore in the previous quarter to Rs153.49 crore reported for the quarter ended March 31.

Experts Take:

HCL Technologies’ operating performance was in line with our expectations. However, the tax reversals aided the company to report a higher than expected growth of 20.75 in its profit after tax.

‘The key highlight of the quarterly result is the strong growth guidance of 10.5%-12.5% in revenues for the next fiscal year 2018. This is higher than its peers and reflects the management confidence of achieving higher than industry growth rates in FY2018,” Sanjeev Hota, AVP Research, Sharekhan told Moneycontrol.com.

“We have a Buy rating on HCL Tech and it has been our preferred pick in the sector due to relatively better growth outlook and attractive valuations,” he said.

Client Additions:

Strong client addition was seen in bucket of over $5 million clients up by 13, over $10 million clients up by 9, over $20 million clients up by 10, over $40 million clients up by 5, and over $50 million clients up by 6.

Rs 3,500 cr Buyback programme:

HCL Technologies Ltd announced a share buyback programme of Rs3,500 crore.

“We are glad about the overall Fiscal 2017 and the quarter performance. Our Cash Flow generation during the year continues to be robust with net income to Operating Cash Flow conversion at 112 percent,” Anil Chanana, CFO, HCL Technologies Ltd.

“Our focus on rewarding shareholders continues with the announcement of Rs3,500 crore Buy-back program. Return on Equity continues to be healthy at 27 percent for the year”, he said.