Motilal Oswal's report on HCL TechnologiesRevenue below already-muted expectations; but expect growth to revive in 2H: HCLT’s 1QFY16 constant currency revenue growth of 1.5% QoQ was below our estimate of 2.7%, even after factoring the weak expectations led by softness in IMS. That said, concerns around IMS were alleviated by management citing 10+ large engagements in various stages of transformation-revenue growth from which will kick-in from 2HFY16. In addition, Engineering Services growth remains strong, up 23.7% YoY CC. We expect traction in ~54% of HCLT’s business (Engineering Services, IMS and BPS), driving our positive stance on the stock.See valuation upside from growth revival: HCLT’s EBIT margin guidance of 21-22% for FY16 and outlook of healthy growth led by IMS in the remainder of the year alleviate concerns around soft 1Q revenue growth. That said, the company cannot afford to falter on execution after three quarters of relatively muted performance. Over the medium to long term, opportunities in IMS, Engineering and Continental Europe should help drive stronger growth than peers. We expect the company to grow its revenues and EPS at 11% CAGR each over FY15-17. Maintain Buy with a price target of INR 1,000, which discounts FY17E EPS by 16x, says Motilal Oswal research report.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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