1. Angel Broking keeps ‘buy’ on HCL Tech with Rs 1,014 target on strong order book

Angel Broking keeps ‘buy’ on HCL Tech with Rs 1,014 target on strong order book

Expectations of robust growth in revenues for the next fiscal year and a strong order book are the key factors Angel Broking has maintained a 'buy' rating on HCL Technologies.

By: | Published: May 15, 2017 6:36 PM
Last week, HCL Technologies had posted more than 27 percent rise in net profit at Rs 2,475.27 crore for the quarter ended March 2017 compared to the year- ago period.

Expectations of robust growth in revenues for the next fiscal year and a strong order book are the key factors Angel Broking has maintained a ‘buy’ rating on HCL Technologies. “For FY’2018, revenues are expected to grow 10.5-12.5% in Constant Currency (CC) and EBIT Margin of 19.5-20.5%. On the back of strong order book and given the attractive valuations, we recommend a Buy on the stock,” said Angel Broking in a research report.

Last week, HCL Technologies had posted more than 27 percent rise in net profit at Rs 2,475.27 crore for the quarter ended March 2017 compared to the year- ago period. The country’s fifth-largest IT services company, with over 1,00,000 employees catering to more than 450 clients, had registered a net profit of Rs 1,938.66 crore in the January- March 2016 quarter, the company had stated in a filing with the Bombay Stock Exchange.

The company’s total income was up over 20 per cent to Rs 13,183 crore in the quarter under review from Rs 10,925 crore in the corresponding quarter last year, as per Indian accounting standards. For 2016-17, net profit was up over 53 per cent to Rs 8,606.47 crore, while total income grew nearly 52 per cent to Rs 48,640.85 crore from the previous financial year. The Board of Directors has declared an interim dividend of Rs 6 per equity share of Rs 2 each of the company for the financial year 2017-18.

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HCL Technologies’ revenue is likely to grow between 10.5-12.5 percent in constant currency terms while the FY18 expected Operating Margin (EBIT) range is from 19.5 per cent to 20.5 per cent.

“On the basis of deals on hand, the company gave a revenue growth guidance of 10.5-12.5% in CC for FY2018, which includes a component of inorganic growth, adjusting for which, the organic growth would be 7.5-9.5% in CC for FY2018. The operating margin (EBIT) for FY’2018 is expected to be in the range of 19.5-20.5%. We expect HCL Tech to post a USD and INR revenue CAGR of 10.7% and 10.7% respectively, over FY2017–19E (inclusive of the acquisition of Geometric Software and Volvo deals),” the report added.

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