Anchored by robust FY14 margin, we are revising up our Ebitda margin 20 bps and 40 bps for FY15e and FY16e, respectively. This, along with higher forex gain in FY16, leads us to revise up FY16e EPS 11%.
We expect HCLTs all-round growth momentum to continue given the improved demand outlook in the US and higher outsourcing stemming from Europe. This, along with enhanced margin comfort, leads us to maintain rating.
HCLTs Q4FY14 revenue of $1,407 million was below Streets estimate of 4.0% growth, while Ebitda margin at 26.4% surpassed the 25.8% estimate. FY14 has been a stellar year for the company with deal wins with TCV of $5 billion plus.
HCLTs 3.4% q-o-q growth was led by the BPO segment (17.7%), while core software grew 2.3%. IMS, the companys growth driver for long, rose mere 3.7%, lower than peers (TCS: 10.7%, Infosys: 11.9%, Wipro: 5.0%).
All verticals, except manufacturing (down 2.1% q-o-q), saw a sequential growth. Financial services & telecom, media & entertainment (TME) grew 9.3% and 10.0%, respectively, while retail and public services grew 2.9% and 2.8%, respectively.