KR Choksey's research report on HCL Technologies
HCL Tech’s Q4 FY18 results were below our estimates in terms of revenue as well as in profitability front owing to renewals of deals and decelerating revenue growth from Indian business. Europe and Asia-Pacific have outperformed as far as Geographies are concerned, with 7.2%/10.3% qoq growth, whereas Americas saw a decline of 0.5% qoq. Financial Services and Telecom have led the growth pack with 4.2% and 2.5% qoq respectively, which is primarily supported by Mode 2 services. Infrastructure Services led the growth pack with a 4.2% qoq followed by BPO service at 8.1% qoq. ER&D growth remained subdued amidst seasonal headwind on IP renewals and lesser support from organic components. The growth is expected to revive on the back of its previous acquisitions (Butler America & Geometric), which have supported its ER&D segment to grow by 32% yoy.
Outlook
We have a “BUY” rating on the stock and we have assigned a multiple of 15.5x to its FY20E EPS of INR 81.5 to arrive at a price target of INR 1,263, an upside of 25.7% compared to CMP.
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