HCL Technologies posted 4QFY2017 results better than expected. In US$ terms, the revenues came in at US$1,817mn (v/s US$1,810mn expected) v/s US$1,745mn in 3QFY2017, a qoq growth of 4.1%. On Constant Currency (CC) basis, company posted a 3.8% qoq growth. On the operating front, EBIT came in at 20.0% (v/s 20.1% expected) v/s 20.4% in 3QFY2017, a dip of 34bps qoq. Thus,PAT came in at 2,325cr (v/s `1,982cr expected) v/s `2,070cr in 3QFY2017, up 12.3% qoq. For FY’2018, revenues are expected to grow 10.5-12.5% in Constant Currency (CC) and EBIT Margin of 19.5-20.5%. We maintain our BUY. Target Price is Rs 1014 in 12 months.
Quarterly highlights: In US$ terms, the revenues came in at US$1,817mn v/sUS$1,745mn in 3QFY2017, a qoq growth of 4.1%. On Constant Currency (CC) basis, company posted a 3.8% qoq growth. On the growth front, USA posted a CC qoq growth of 5.3%, Europe posted a dip of 3.0% CC and ROW posted a CC qoq growth of 15.8%. In terms of verticals, Financial Services posted a CC qoq growth of 3.0%, Manufacturing posted a CC qoq growth of 6.3%, Life sciences &Healthcare posted a CC qoq growth of 0.1%, Public Services posted a CC qoq growth of 8.1%, while Retail & CPG posted a CC qoq growth of 2.1%. On the operating front, EBIT came in at 20% (v/s 20.1% expected) v/s 20.4% in 3QFY2017, a dip of 34bps qoq. Thus, PAT came in at 2,325cr (v/s `1,982cr expected) v/s `2,070cr in 3QFY2017, up 12.3% qoq.
Outlook and valuation: We expect HCL Tech to post a USD and INR revenue CAGR of 10.7% and 10.7% respectively over FY2017–19E. On the back of strong order book and given the attractive valuations, we recommend a Buy on the stock.
Sales just in-line with expectation
On the revenue front, the company posted a 4.1% sequential growth in USD revenues to US$1,817mn (v/s US$1,810mn expected) v/s US$1,745mn in 3QFY2017. Revenue in Constant Currency (CC) was up 3.8% qoq. In Rupee terms, revenues came in at `12,053cr (v/s `12,064cr expected) v/s `11,814cr in 3QFY2017, up 2.0% qoq. On the growth front, USA posted a CC qoq growth of 5.3%, Europe posted a dip of 3.0% CC and ROW posted a CC qoq growth of 15.8%. In terms of verticals, the Financial Services posted a CC qoq growth of 3.0%, Manufacturing posted a CC qoq growth of 6.3%, Life sciences & Healthcare posted a CC qoq growth of 0.1%, Public Services posted a CC qoq growth of 8.1%, while Retail & CPG posted a CC qoq growth of 2.1%. The vertical which posted a dip was Telecommunication, Media, and Publishing & Entertainment which came in at 2.1%.
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