Edelweiss's research report on HCL TechHCL Technologies (HCLT) has acquired Geometric, excluding 3DPLM business, in a share swap deal—10 shares of HCLT for 43 shares of Geometric. The acquired business generates ~USD140mn revenue with 15% EBIDTA margin and 9% PAT margin as per the company’s last quarterly report. In our view, the acquisition gives HCLT access to Geometric’s 60 plus clients broadly in the auto and engineering space and will strengthen the former’s ER&D practice, especially in PLM and digital manufacturing domain. Though we anticipate the deal to marginally impact HCLT’s earnings, we envisage it to further augment the ER&D vertical. Maintain ‘BUY’. At CMP, the stock is attractively valued at 15.7x/13.0x FY16E/FY17E EPS. ER&D is the growth driver for HCLT along with IMS and the deal further strengthens it. We are enthused by the fact that the acquisition strategy focuses on skill sets and not revenue. We maintain ‘BUY/SP’ with target price of INR 1,010. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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