Accumulate HCL Technologies; target RS 765: Angel Broking

Angel Broking is bullish on HCL Technologies and has recommended accumulate rating on the stock with a target price of Rs 765 in its January 17, 2013 research report.

“HCL Tech reported revenue of US$1,154mn, up 3.6% qoq in 2QFY2013, on the back of a whopping 10.0% qoq USD revenue growth in constant currency (CC) terms in its infrastructure services business, though volume growth in core software services stood muted at 0.4% qoq. Despite having a negative wage hike impact, the EBITDA and EBIT margin of the company increased by 40bp and 43bp qoq to 22.6% and 19.8%, respectively, aided by operational efficiencies and improvement in utilization level.”

“The company announced appointment of Mr Anant Gupta as the Chief Executive Officer of the company with effect from January 17, 2013. The company is witnessing a healthy demand environment and has signed 12 multi-year, multi-million dollar deals during 2QFY2013 on top of 12 deals signed in 1QFY2013. The management maintained its stance that the deals are out of vendor-churn exercises rather than any incremental spending. However, we believe, in such a competitive scenario where all the companies are eyeing the existing pool of deals, an aggressive company like HCL Tech with end-to-end IT capabilities and a strong client mining ability, will emerge as a front runner.”

We expect HCL Tech to be the outperformer among tier-I IT companies, with USD and INR revenue CAGR of 12.7% and 16.4%, respectively, over FY2012–14E. We expect EBITDA and PAT to post a 20.9% and 21.0% CAGR over FY2012-14E. We value the company at 14.5x FY2014E EPS and give it a target price of Rs765. We maintain our accumulate rating on the stock,” says Angel Broking research report.

Non-Institutions holding more than 90% in Indian cos

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