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HCL Tech raises FY20 revenue forecast; here are key highlights of analysts concall

The company closed the Sankalp acquisition to enhance leadership in the Semiconductors and Industrial IoT spaces.

January 25, 2020 / 08:23 PM IST
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HCL Technologies on January 17 reported a 14.6 percent sequential growth in Q3FY20 profit at Rs 3,037 crore on revenue of Rs 18,135 crore that increased 3.5 percent QoQ.

Company raised its lower end of full year guidance as it expects revenue in constant currency to grow by 16.5-17 percent in FY20 (against earlier guidance of 15-17 percent).

HCL expects full year margin to in the range of 19–19.5 percent against 18.5-19.5 percent earlier.

Revenue from BFSI segment fell 2.1 percent QoQ, but grew by 4.3 percent YoY during the quarter.

Here are key highlights from HCL Technologies' conference call by Narnolia Financial Advisors:


Management Participants: C Vijayakumar - President & CEO, Prateek Aggarwal - CFO, Darren Oberst - Corporate VP in product and platform

Revenue grew 16.4 percent YoY in Q3 with strong operating margin above 20 percent EBIT again. Organic growth was just under 10 percent YoY and 0.3 percent sequential.

EBIT for the quarter is 20.2 percent which is 28bps improvement. 60 bps wage hike was completely offset by 60 bps benefit from operational efficiency.

HCL software business scaled up aggressively and added close to 4600 customer across all parts of the global including some geographies where HCL didn’t had presence. 15000 transactions took place in 3Q. The company did 1800 partners and reseller in Q3. The company is close to run rate which was expected after acquisition.

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The company closed the Sankalp acquisition to enhance leadership in the Semiconductors and Industrial IoT spaces.

Mode wise performance: The company’s mode 2 & mode 3 revenues now contributes 34 percent of the revenues. Mode 2 grew 23.5 percent YoY While Mode 3 grew 55 percent+ YoY. Furloughs impact was more in Mode 1 and Mode 2 businesses. However sharp increase in Mode 2 margin is not taken as sustainable, couple of quarter more to see the margin predictability. The management is confident of momentum to continue in core service going ahead.

Deal wins: Q3 experienced a dip in bookings due to timing issue as the client has taken little longer to decide. Booking is little lower than last quarter. But qualified pipeline is all term high, and management is confident of a higher conversion of pipeline to booking in Q4. Management is seeing the pipeline currently at its peak and company remains positive about the conversions that will happen in coming quarters

Lower end guidance revised: At the beginning of the year, the company guided 14 percent to 16 percent and further increasing to 15 percent to 17 percent. The company now revised its lower end of the guidance with 16.5 percent to 17 percent, out of which inorganic growth will come at 6 percent and rest organic guidance 10.5 percent to 11 percent. On Ebit side the company revised it to 19 to 19.5 percent for FY20.
Moneycontrol News
first published: Jan 25, 2020 08:23 pm

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