Buy HCL Technologies; target of Rs 1010: Edelweiss

Edelweiss's report on HCL TechnologiesHCL Technologies’ (HCLT) Q1FY16 revenue at USD1,545mn, up 0.5% QoQ, came below Street’s 0.8% estimate while EBITDA margin, at 21.9%, up 40bps QoQ, was ahead of Street’s 21.0% forecast. In a seasonally strong quarter, revenue growth was impacted by currency, project delays/cancellation and weaker domestic revenues. The company reiterated positive commentary on demand environment, riding healthy deal pipeline and robust order book, while maintaining EBIT margin expectations in the 21‐22% range for FY16. We reduce our FY16/FY17 USD revenue growth estimates to 8.9%/12.1% from 13.7%/13.5% earlier, on account of slower revenue growth in Q1FY16. Maintain ‘BUY’ with a revised target price of INR 1,010 (INR 1,030 earlier).Outlook and valuations: Investing for growth; maintain ‘BUY’ Post earnings warning on Sept 30, 2015, the stock has corrected 13% and is now reasonably valued at 16.1x/13.6x FY16E/FY17E EPS. We believe that factors responsible for lower revenue growth in Q1 were one‐off and the company’s fundamentals and macro‐environment has not changed. We maintain ‘BUY/SP’ with TP of INR 1,010 (16x FY17E EPS) on strong order book, deal signing momentum and execution track record, says Edelweiss Securities Limited 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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