June 29, 2016 / 16:16 IST
Prabhudas Lilladher's research report on HCL Tech
Management has clarified that the EBIT margins for the core business would remain stable around 20.8% (March‐2016 qtr margins). Volvo and Geometric acquisitions will impact margins and the Volvo large deal will reach steady state margins in 6‐8 quarter period. As per our analysis the worst case impact on margins would be ~100‐110bps. Hence, the company is guiding for EBIT margin range of 19%‐20%. Company expects FY17 revenue growth (including ~3% contribution from acquisitions) to be in‐line with industry growth (10‐12% YoY in constant currency).
We believe at FY17/18 P/E of 13.5/12.5x, the risk reward is favourable and we see upside risk to our FY17/18 EPS estimates. We have Accumulate rating with TP of Rs890 based on 15x FY18 EPS.
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