HCLTech 3Q FY13
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Transcript of HCLTech 3Q FY13
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7/28/2019 HCLTech 3Q FY13
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Please refer to important disclosures at the end of this report 1
(` cr) Consl. 3QFY13 2QFY13 % chg (qoq) 3QFY12 % chg (yoy)Net revenue 6,425 6,274 2.4 5,216 23.2EBITDA 1,276 1,244 2.5 818 56.0
EBITDA margin (%) 19.9 19.8 2bp 15.7 418bp
PAT 1,040 965 7.8 603 72.5Source: Company, Angel Research
For 3QFY2013, HCL Technologies (HCL Tech) reported yet another set of healthy
results, beating our as well as market expectations on all fronts. HCL Tech won
over US$1bn multi-year, multi-million dollar deals during the quarter, thus
sustaining its momentum of signing ~US$1bn+ total contract value (TCV) worth
of deals, over the past few quarters. The strong set of results from HCL Tech for
3QFY2013 shrug off any concerns regarding the health of the Indian IT industry,
which were raised due to weak quarterly results by Infosys. HCL Techs
Management sounded confident of sustaining revenue growth within the top-tier
league. We maintain our Buy rating on the stock.Quarterly highlights: For 3QFY2013, HCL Tech reported revenue ofUS$1,191mn, up 3.2% qoq, on the back of a whopping 9.0% qoq USD revenue
growth in constant currency (CC) terms in its infrastructure services business,
though volume growth in core software services stood muted at 0.4% qoq. During
the quarter, HCL Techs EBITDA margin declined by 18bp qoq to 22.4%, while
the EBIT margin remained almost flat qoq at 19.9%. PAT stood tall at `1,040, up
7.8% qoq, aided by forex gain of `23cr vs a `13cr loss in 2QFY2013.
Outlook and valuation: The company is witnessing a healthy demandenvironment and has been able to win over US$1bn multi-year, multi-million
dollar deals this quarter, thus sustaining its momentum of signing ~US$1bn+
TCV worth of deals, over the past few quarters. The Management maintained that
the deals are out of vendor-churn exercises rather than on any incremental
spending. However, we believe, in such a competitive scenario where all the
companies are eyeing the existing pool of deals, an aggressive company like HCL
Tech with end-to-end IT capabilities, and a strong client mining ability, will
emerge as a front runner. We expect HCL Tech to be the outperformer among
tier-I IT companies, with USD and INR revenue CAGR of 12.8% and 15.3%,
respectively, over FY201215. We value the company at 14x FY2014E EPS andgive it a target price of `863.We maintain our Buy rating on the stock.Key financials (Consolidated, US GAAP)Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015ENet sales 16,034 21,031 25,444 28,633 32,216% chg 27.6 31.2 21.0 12.5 12.5
Net profit 1,710 2,526 3,845 4,033 4,343% chg 30.5 47.8 52.2 4.9 7.7
EBITDA margin (%) 17.1 19.1 22.3 21.5 20.7
EPS (`) 24.5 36.0 54.6 57.3 61.7P/E (x) 30.7 20.8 13.8 13.1 12.2
P/BV (x) 6.2 4.9 3.8 3.1 2.6
RoE (%) 20.3 23.5 28.1 24.0 21.5
RoCE (%) 15.4 18.3 23.9 22.2 20.6
EV/Sales (x) 3.2 2.4 1.9 1.6 1.4
EV/EBITDA (x) 18.9 12.8 8.6 7.6 6.7
Source: Company, Angel Research
BUYCMP `751
Target Price `863
Investment Period 12 Months
Stock Info
Sector
Net debt (` cr) (2,684)
Bloomberg Code
Shareholding Pattern (%)
Promoters 62.1
MF / Banks / Indian Fls 8.4
FII / NRIs / OCBs 21.8
Indian Public / Others 7.7
Abs. (%) 3m 1yr 3yr
Sensex (6.2) 7.9 6.5
HCL Tech 6.8 56.2 113.2
IT
Avg. Daily Volume
Market Cap (` cr)
Beta
52 Week High / Low
Face Value (`)
BSE Sensex
Nifty
Reuters Code
2
18,731
5,689
HCLT.BO
HCLT@IN
51,379
0.8
807/454
120,859
Ankita Somani+91 22 3935 7800 Ext: 6819
HCL TechnologiesPerformance Highlights
3QFY2013 Result Update | IT
April 17, 2013
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HCL Technologies | 3QFY2013 Result Update
April 17, 2013 2
Exhibit 1:3QFY2013 performance (Consolidated, US GAAP)
Y/E June (` cr) 3QFY13 2QFY13 % chg (qoq) 3QFY12 % chg (yoy) 9MFY13 9MFY12 % chg (yoy)Net revenue 6,425 6,274 2.4 5,216 23.2 18,789 15,112 24.3Cost of revenue 4,113 4,026 2.2 3,518 16.9 12,085 10,219 18.3Gross profit 2,312 2,248 2.9 1,698 36.2 6,704 4,893 37.0SG&A expense 872 831 5.0 739 18.1 2,498 2,169 15.2
EBITDA 1,439 1,417 1.6 959 50.1 4,207 2,724 54.4Dep. and amortization 163 172 (5.1) 141 15.7 504 412 22.6
EBIT 1,276 1,244 2.5 818 56.0 3,702 2,313 60.1
Other income 66 28 23 129 55
PBT 1,342 1,272 5.4 841 59.6 3,832 2,368 61.8
Income tax 325 295 10.1 202 61.2 892 566 57.7
PAT 1,017 977 4.0 639 59.1 2,940 1,803 63.1Forex gain/(loss) 23 (13) (284.8) (36) (163.6) (50) (130) (61.4)
Adjusted PAT 1,040 965 7.8 603 72.5 2,889 1,672 72.8EPS 14.8 13.7 8.0 8.6 71.9 41.0 23.9 71.7
Gross margin (%) 36.0 35.8 16bp 32.5 343bp 35.7 32.4 330bp
EBITDA margin (%) 22.4 22.6 (18)bp 18.4 401bp 22.4 18.0 436bp
EBIT margin (%) 19.9 19.8 2bp 15.7 418bp 19.7 15.3 440bp
PAT margin (%) 16.0 15.3 71bp 11.5 451bp 15.3 11.0 425bp
Source: Company, Angel Research
Exhibit 2:3QFY2013 Actual vs Angel estimates
(` cr) Actual Estimate Variation (%)Net revenue 6,425 6,432 (0.1)
EBITDA margin (%) 22.4 22.3 12bp
PAT 1,040 916 13.5
Source: Company, Angel Research
Outperformance yet again
For 3QFY2013, HCL Tech reported a revenue of US$1,191mn, up 3.2% qoq, on
the back of a whopping 9.0% qoq USD revenue growth in CC terms in its
infrastructure services business and 0.4% qoq volume growth in its core software
services business. Cross-currency movement impacted the companys revenue by
0.6% qoq. In CC terms, the revenue grew by 3.8% qoq to US$1,198mn.
The volume growth of 0.4% qoq in core software services was on account of a
0.4% qoq offshore and 0.3% qoq onsite volume growth. HCL Tech won over
US$1bn multi-year, multi-million dollar deals this quarter, thus sustaining its
momentum of signing ~US$1bn+ TCV worth of deals, over the past few quarters,
which is commendable. In INR terms, revenue came in at `6,425cr, up 2.4% qoq.
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 3:Volume growth trend (Effort wise) Software Services
Source: Company, Angel Research
Core software services post modest revenue growth: During the quarter, coresoftware services (contributed 65.8% to revenue) posted a 1.0% qoq revenue
growth (USD terms) to US$783mn, led by 0.4% qoq volume growth. In CC terms,
the revenue growth in core software services came in at 1.7% qoq. This was due to
a decline and challenges seen in discretionary spending, which majorly impacted
the engineering and R&D services (ERD; contributed 17.1% to revenue) and custom
application services enterprise (contributed 29.7% to revenue) revenues, which
grew merely by 0.8% and 0.6% qoq, respectively in CC terms. Enterprise
application services (EAS), which has been witnessing a decline in revenues since
the past couple of quarters, reported a 4.4% qoq growth in USD revenue in CCterms during 3QFY2013. The Management indicated that clients are taking
decisions on discretionary spending on a quarterly basis, rather than giving a
longer term visibility. Projects related to global consolidation and deployment
remain the companys focus for core ERP implementation work.
Infrastructure services emerges as the primary growth driver: The infrastructuremanagement services (IMS) segment (contributed 29.9% to revenue) again
reported a whopping 8.6% qoq increase in revenue (USD terms) to US$356mn. In
CC terms, the revenue of IMS grew by 9.0% qoq. The Management indicated that
IMS is doing well globally. Currently, the segment is witnessing continued demand
traction from the re-bid market with more than 75% of the TCV coming from it.
The Management attributes signing up of large multi-year transformational deals
in the segment to changing customer business models, and to the trend of putting
in place enterprise class infrastructures.
BPO services posted tepid growth: The business process outsourcing (BPO)segment posted a mere 0.7% qoq increase in revenue to US$51mn. In CC terms,
the segment reported a 2.4% qoq growth in revenue. Since 3QFY2012, the BPO
business has entered the EBITDA and EBIT positive zone. The demand environment
is heating up as clients are looking at globalization of delivery capabilities, which is
enabling them in driving transformation and achieving enterprise-wide cost
efficiency. The company is continuously investing in building platforms for non
voice-based businesses in this segment. Demand is seen in areas of cloud, mobility,social media and multi-tower end-to-end process data.
5.4
0.5
3.8
0.4 0.4
(3.7)
5.7
(1.2)
0.4 0.3
2.9
1.82.5
0.4 0.4
(4)
(2)
0
2
4
6
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
(%)
Offshore Onsite Total
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 4:3QFY2013 performance (Segment wise)
(US$ mn) 3QFY13 2QFY13 % chg qoq 3QFY12 % chg yoySOFTWARE SERVICES
Revenue 783 775 1.0 747 4.8Gross profit 301 297 1.3 258 16.9
Gross margin (%) 38.5 38.3 12bp 34.5 396bp
EBITDA 183 184 (0.9) 145 25.8
EBITDA margin (%) 23.3 23.8 (45)bp 19.4 389bpEBIT 166 166 0.2 128 30.0
EBIT margin (%) 21.2 21.4 (17)bp 17.1 410bp
INFRASTRUCTURE SERVICESRevenue 356 328 8.6 251 41.6Gross profit 110 100 10.3 69 58.7
Gross margin (%) 30.9 30.4 49bp 27.6 332bp
EBITDA 78 70 10.9 45 74.7
EBITDA margin (%) 21.9 21.5 47bp 17.8 415bpEBIT 67 60 11.6 36 85.4
EBIT margin (%) 18.9 18.4 52bp 14.4 446bp
BPO SERVICESRevenue 51 51 0.6 49 3.8Gross profit 17 17 3.6 14 22.1
Gross margin (%) 33.3 32.4 98bp 28.3 499bp
EBITDA 6 6 1.7 3 114.3
EBITDA margin (%) 11.7 11.6 13bp 5.7 603bpEBIT 3 3 3.4 0
EBIT margin (%) 5.8 5.7 16bp 0.4 544bp
Source: Company, Angel Research
Exhibit 5:Revenue growth trend (Service wise in CC terms)
Source: Company, Angel Research
4.8
(2.0)(1.3)
4.43.9
0.3 0.50.8
2.3 1.6 1.7
0.6
9.2
10.3 10.09.0
(2.0)
4.8
0.7
2.4
(4)
(2)
0
2
4
6
8
10
12
4QFY12 1QFY13 2QFY13 3QFY13
(%)
EAS ERD Custom application IMS BPO services
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HCL Technologies | 3QFY2013 Result Update
April 17, 2013 5
Industry segment wise, the companys anchor industry vertical manufacturing
(contributed 28.4% to revenue) maintained its growth momentum and reported a
strong 7.8% qoq growth in revenues in CC terms. The demand in the
manufacturing space is coming for business needs related to operationalefficiency, cost reduction and product development. The energy and public utilities
(EPU) industry vertical emerged as the primary growth driver for the company,
posting a 14.8% qoq growth in revenues in CC terms. Financial services
(contributed 25.0% to revenue) continued with its growth momentum and reported
a 1.0% qoq growth in CC terms. In the financial services space, the company is
witnessing tighter budgets from the US and European geographies with focus on
cost reduction through RTB strategy. Some amount of discretionary spends in the
financial services space are coming in directed towards customer experience
management. Telecom, which is one of the non-performing industry vertical in
terms of IT spending since the past two years, has been witnessing volatile revenue
growth. During 3QFY2013, revenues from the telecom vertical grew by 4.7% qoq(CC terms). The media, publishing and entertainment (MPE) and healthcare
industry verticals posted 1.4% and 1.6% qoq decline in USD revenue (CC terms),
respectively.
Exhibit 6:Revenue growth trend (industry wise in CC terms)
Growth by vertical (%) 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13Financial services (4.1) 5.2 3.6 10.1 1.0
Manufacturing 0.6 1.6 - 2.0 7.8
Telecom 10.0 (2.8) (3.2) (2.2) 4.7
Retail and CPG (0.3) 4.2 10.2 0.7 2.9
MPE 6.5 4.4 7.3 4.2 (1.4)
Healthcare 8.1 22.9 14.6 2.6 (1.6)
EPU 7.6 13.1 (1.7) 4.7 14.8
Source: Company, Angel Research
During the quarter, HCL Tech reported growth in developed geographies with
revenues from the US and Europe growing by 3.6% and 6.3% qoq (CC terms),
respectively. The revenue from rest of the world (RoW) remained flat qoq. The
Management indicated that since the past 5-6 quarters, the sales force of the
company has increasingly been focused towards the US and Europe geographies.
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 7:Revenue growth trend (Geography wise in CC terms)
Source: Company, Angel Research
Hiring and utilization
During the quarter, HCL Techs employee base reduced by 791 employees due to
employee rationalization program going on in the BPO business segment and
companys efforts to bring in fungibility of employees in enterprise application
services. The companys total employee base currently stands at 84,403. The
company witnessed an addition of 5,146 gross employees, out of which 5,022
were lateral additions.
In the core software services segment, 1,259 gross employees were added but ona net level, the employee base got reduced by 1,638 employees, taking the total
employee base to 52,305. Almost all the gross additions done by the company in
this segment were lateral employee additions (which stood at 1,255). The attrition
rate for the core software services segment increased by 70bp qoq to 14.3% (last
twelve month [LTM] basis), during the quarter.
The infrastructure services segment reported a net addition of 638 employees in
3QFY2013, taking the segments total employee base to 21,921. The gross
addition in the segment stood at 1,674 employees, of which 1,554 were laterals,
indicating that the company is witnessing a robust deal pipeline. The attrition rate
for this segment inched up by 20bp qoq to 14.0% (LTM basis).
The BPO segment, which has been witnessing employee rationalization since the
past four quarters, added 209 net employees, taking the segments total employee
base to 10,177. The company added 2,213 gross employees (all laterals) in the
BPO segment during the quarter. The quarterly offshore attrition rate for this
segment declined to 7.9% during the quarter from 8.7% in 2QFY2013.
(1.0)
2.7
4.0
3.43.6
4.6
7.1
2.7
4.2
6.3
8.8
6.9
(0.8)- 0.1
(3)
0
3
6
9
12
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
(%)
US Europe Rest of the world
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 8:Hiring trend (Net addition, Service wise)
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13Net additionsSoftware services 79 744 (181) (1,323) (1,638)Infrastructure services 340 1,457 1,127 928 638
BPO (1,031) (346) 70 254 209
Total employeesSoftware services 54,703 57,592 55,266 53,943 52,305
Infrastructure services 17,771 19,228 20,355 21,283 21,921
BPO 9,990 9,644 9,714 9,968 10,177
Source: Company, Angel Research
The utilization level offshore, including as well as excluding trainees, improved
substantially by 340bp and 240bp qoq to 79.0% and 80.0%, respectively, led by
reduction in overall employee base. The onsite utilization level declined slightly, by
30bp qoq to 97.0%.
Exhibit 9:Utilization trend (%)
Source: Company, Angel Research
Operating margin almost flat
The operating margin has always been a concern for HCL Tech; however the
Managements focus to improve it, is now paying off. The company has been able
to increase its operating margin in the last four quarters. During 3QFY2013, its
EBITDA margin declined by just 18bp qoq, to 22.4%, while it rose significantly by
400bp, on a yoy basis. The EBIT margin remained almost flat qoq at 19.9%. The
factors affecting EBIT margin of HCL Tech during 3QFY2013 were: 1) an 11bp
qoq negative impact due to exchange, 2) 39bp qoq gain from increase in
utilization level, 3) 7bp qoq gain from efficiencies and 4) 33bp negative impact
due to higher SG&A spends.
72.2 72.474.2
75.6
79.0
79.0
75.177.4 77.6
80.0
94.495.7 95.3
97.3 97.0
60
70
80
90
100
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
(%)
Offshore - Including trainees Offshore -Excluding trainees Ons ite
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 10:Margin profile
Source: Company, Angel Research
Exhibit 11:BPO segment Margin trend
Source: Company, Angel Research
Client pyramid
During the quarter, HCL Tech enhanced its client pyramid with an addition of 37
new clients. The company added one client in the US$20mn-30mn revenuebracket. Nine clients were added in the US$5mn-10mn revenue bracket. The
active client base of the company increased to 547 from 544 in 2QFY2013. The
companys top clients registered a lower-than-companys average growth, with
revenue from the top 5, top 10 and top 20 clients growing by 1.5%, 2.8% and
2.0% qoq (LTM basis, CC terms), respectively.
32.5
35.2 35.2 35.8 36.0
18.4
22.0 22.2 22.6 22.4
15.7
19.4 19.4 19.8 19.9
10
15
20
25
30
35
40
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
(%)
Gross margin EBITDA margin EBIT margin
28.329.7 29.8
32.4 33.4
5.6 6.8
9.211.5 11.6
0.5 1.82.3 5.7
5.9
0
6
12
18
24
30
36
3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
(%)
Gross margin EBITDA margin EBIT margin
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 12:Client pyramid
Particulars 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13Active client relationship 516 536 536 544 547
New client relationship 52 50 38 39 37US$1mn5mn 234 233 228 240 235
US$5mn10mn 60 68 75 80 89
US$10mn20mn 48 51 49 48 47
US$20mn30mn 19 20 20 21 22
US$30mn40mn 11 11 15 14 14
US$40mn50mn 4 4 4 5 5
US$50mn100mn 6 5 5 5 5
US$100mn plus 4 5 5 5 5
Source: Company, Angel Research
Outlook and valuation
HCL Tech has recorded an ~3% CQGR in its revenue over the past eight quarters.
This is primarily on the back of infrastructure management services and custom
application services maintaining their growth momentum and growing at par or
higher than the companys average growth rate. Verticals such as manufacturing,
financial services and retail have proved to be the companys growth drivers.
Geography wise, continental Europe has proved to be a strong spender vis--vis its
peers; HCL Tech has a strong footprint in this geography post the acquisition of
Axon.
The company announced the appointment of Mr Anant Gupta as the Chief
Executive Officer of the company with effect from January 17, 2013. Under his
leadership, the company has been able to win over US$1bn multi-year,
multi-million dollar deals this quarter, thus sustaining its momentum of signing
~US$1bn+ TCV worth of deals, over the past few quarters. The Management
maintained that the deals are out of vendor-churn exercises rather than on any
incremental spending. However, we believe, in such a competitive scenario where
all the companies are eyeing the existing pool of deals, an aggressive company
like HCL Tech, with end-to-end IT capabilities and a strong client mining ability,
will emerge as a front runner. The Management sounded confident of sustaining
revenue growth within the top-tier league along with maintaining operatingmargins (excluding currency) through operational levers such as utilization, higher
off-shoring of revenues and growth leverage. The company has been focusing a
lot of effort on the US and Europe geographies to chase the rebid opportunity. The
companys recent win ratios of ~50% drive confidence on sustaining revenue
growth momentum, going ahead. We expect HCL Tech to be the outperformer
among tier-I IT companies, with USD and INR revenue CAGR of 12.8% and
15.3%, respectively, over FY201215, on the back of its higher-value services
portfolio, which is set to address the current demand landscape.
On the operating front, the company considerably expanded its EBITDA margin to
22.4% in 3QFY2013. The Management indicated that the company remainsfocused on sustaining its EBIT margin in the range of 18-19% in the near term
along with volume growth. We expect the EBIT and PAT to post a 19.1% and
19.6% CAGR over FY2012-15.
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HCL Technologies | 3QFY2013 Result Update
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At the current market price of `751, the stock is trading at 13.1x FY2014E and
12.2x FY2015E EPS of `57.3 and `61.7, respectively. We value the company at14x FY2014E EPS and give it a target price of `863.We maintain Buy rating onthe stock.Exhibit 13:Key assumptions
FY2013 FY2014 FY2015Revenue growth (USD) 13.0 13.0 12.5
USD-INR rate (realized) 54.2 54.0 54.0
Revenue growth (INR) 21.0 12.5 12.5
EBITDA margin (%) 22.3 21.5 20.7
EBIT margin (%) 19.6 18.9 18.2
Tax rate (%) 23.7 26.5 27.0
EPS growth (%) 51.5 5.0 7.7
Source: Company, Angel Research
Exhibit 14:One-year forward PE (x) chart
Source: Company, Angel Research
50
150
250350
450
550
650
750
850
950
1050
Aug-07 Apr-08 Dec-08 Aug-09 Apr-10 Dec-10 Aug-11 Apr-12 Dec-12
(`)
Price 19x 16x 13x 10x 6x
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HCL Technologies | 3QFY2013 Result Update
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Exhibit 15:Recommendation summary
Company Reco CMP Tgt Price Upside FY2015E FY2015E FY2012-15E FY2015E FY2015E(`) (`) (%) EBITDA (%) P/E (x) EPS CAGR (%) EV/Sales (x) RoE (%)
HCL Tech Buy 751 863 15.0 20.7 12.2 19.6 1.4 21.5Hexaware Buy 89 105 18.5 19.2 7.6 9.5 0.9 22.1
Infosys Accumulate 2,282 2,465 8.0 27.7 12.5 7.9 2.0 19.3
Infotech Enterprises Buy 167 196 17.0 18.5 7.7 14.5 0.4 13.1
KPIT Cummins Buy 97 130 34.6 15.2 6.7 21.8 0.5 18.8
Mahindra Satyam Buy 110 143 30.2 19.1 9.2 2.3 0.9 20.1
MindTree Accumulate 858 926 7.9 19.4 9.3 19.9 0.8 18.8
Mphasis Accumulate 359 395 10.2 17.4 8.6 3.3 0.6 13.6
NIIT^ Buy 23 30 30.4 9.1 4.3 (7.1) 0.1 11.9
Persistent Accumulate 547 602 10.1 24.6 9.1 19.3 0.9 16.8
TCS Accumulate 1,459 1,624 11.3 28.1 16.6 17.3 3.2 27.4
Tech Mahindra Buy 956 1,230 28.7 18.1 8.3 10.7 1.4 19.1
Wipro Buy 375 450 20.0 19.5 11.9 11.6 1.3 17.6
Source: Company, Angel Research; Note: Valued on SOTP basis
Company Background
HCL Tech is India's fifth largest IT services company, with over 84,000 employees
catering to more than 540 clients. The company's service offerings include
enterprise application services (EAS), custom applications, engineering and
research and development (ERD) and infrastructure management services (IMS). In
December 2008, HCL Tech acquired UK-based SAP consulting company - Axon,which now contributes ~10% to its consolidated revenue.
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Profit and loss statement (Consolidated, US GAAP)
Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015ENet sales 16,034 21,031 25,444 28,633 32,216Cost of revenues 10,914 14,056 16,382 19,024 21,838
Gross profit 5,120 6,975 9,062 9,609 10,378% of net sales 31.9 33.2 35.6 33.6 32.2
SG&A expenses 2,371 2,950 3,381 3,455 3,701
% of net sales 14.8 14.0 13.3 12.1 11.5
EBITDA 2,749 4,025 5,680 6,154 6,677% of net sales 17.1 19.1 22.3 21.5 20.7
Dep. and amortization 498 564 684 735 822
% of net sales 3.1 2.7 2.7 2.6 2.6
EBIT 2,251 3,461 4,996 5,420 5,854% of net sales 14.0 16.5 19.6 18.9 18.2
Other income, net 26 71 143 7 95
Profit before tax 2,277 3,532 5,139 5,427 5,949
Provision for tax 485 818 1,219 1,438 1,606
% of PBT 21.3 23.2 23.7 26.5 27.0
PAT 1,791 2,714 3,920 3,989 4,343Share from equity invst. - - - - -
Forex loss (82) (188) (75) 44 -
Adj. net profit 1,710 2,526 3,845 4,033 4,343EPS (`) 24.5 36.0 54.6 57.3 61.7
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Balance sheet (Consolidated, US GAAP)
Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015ECash and cash equivalent 520 667 915 1,255 1,678
Account receivables, net 2,591 3,836 3,890 4,377 4,925Unbilled receivables 816 1,508 1,394 1,569 1,765
Deposit with banks 1,079 1,282 1,898 2,604 3,481
Deposit (one year with HDFC ltd) - 50 50 50 50
Investment securities, available for sale 643 546 1,131 1,551 2,074
Other current assets 1,255 1,521 1,654 1,861 2,094
Total current assets 6,902 9,410 10,931 13,267 16,067Property and equipment, net 2,217 2,478 2,611 2,694 2,689
Intangible assets, net 4,188 4,940 4,940 4,940 4,940
Deposits with HDFC Ltd. 50 50 88 121 161
Fixed deposits with banks 110 110 194 266 355
Investment securities HTM 95 95 167 229 306
Investment in equity investee 23 40 8 53 53
Other assets 1,039 1,805 1,926 2,881 3,880
Total assets 14,624 18,928 20,864 24,451 28,453Current liabilities 3,376 4,939 4,743 5,395 6,129
Borrowings 2,124 1,922 1,219 866 514
Other liabilities 689 1,335 1,233 1,403 1,594
Total liabilities 6,189 8,196 7,196 7,664 8,237Minority interest - - - - -
Total stockholder equity 8,435 10,731 13,668 16,787 20,216
Total liabilities and stock holder equity 14,624 18,928 20,864 24,451 28,453
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Cash flow statement (Consolidated, US GAAP)
Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015EPre tax profit from operations 2,094 3,299 4,870 5,328 5,816
Depreciation 498 564 684 735 822Expenses (deferred)/written off (82) (188) (75) 44 -
Pre tax cash from operations 2,510 3,675 5,479 6,107 6,638
Other income/prior period ad 183 233 269 99 134
Net cash from operations 2,693 3,908 5,748 6,206 6,771
Tax (485) (818) (1,219) (1,438) (1,606)
Cash profits 2,207 3,090 4,529 4,768 5,165(Inc)/dec in current assets (727) (2,204) (73) (870) (977)
Inc/(dec) in current liabilities 243 1,563 (196) 652 735
Net trade working capital (484) (641) (269) (218) (242)
Cash flow from oper. actv. 1,724 2,449 4,260 4,550 4,923(Inc)/dec in fixed assets (797) (778) (770) (770) (770)
(Inc)/dec in intangibles 56 (799) (47) (48) (47)
(Inc)/dec in investments 45 (173) (1,362) (1,339) (1,608)
(Inc)/dec in minority interest - - - - -
Inc/(dec) in non-current liab. (50) 646 (101) 169 191
(Inc)/dec in non-current assets (75) (766) (121) (955) (999)
Cash flow from invest. actv. (821) (1,871) (2,402) (2,943) (3,233)Inc/(dec) in debt (539) (202) (703) (353) (353)
Inc/(dec) in equity/premium 394 497 - - -
ESOP charges (90) (71) (84) (91) (91)
Dividends (615) (655) (824) (824) (824)
Cash flow from financing actv. (851) (431) (1,611) (1,267) (1,267)Cash generated/(utilized) 51 147 247 340 423Cash at start of the year 469 520 667 915 1,255
Cash at end of the year 520 667 915 1,255 1,678
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Key ratios
Y/E June FY2011 FY2012 FY2013E FY2014E FY2015EValuation ratio (x)P/E (on FDEPS) 30.7 20.8 13.8 13.1 12.2
P/CEPS 23.7 16.9 11.5 10.9 10.1
P/BVPS 6.2 4.9 3.8 3.1 2.6
Dividend yield (%) 1.1 1.1 1.2 1.3 1.5
EV/Sales 3.2 2.4 1.9 1.6 1.4
EV/EBITDA 18.9 12.8 8.6 7.6 6.7
EV/Total assets 3.5 2.7 2.3 1.9 1.6
Per share data (`)EPS (Fully diluted) 24.5 36.0 54.6 57.3 61.7
Cash EPS 31.8 44.5 65.2 68.6 74.3
Dividend 8.0 8.0 9.0 10.0 11.0
Book value 121 154 197 242 291
Dupont analysisTax retention ratio (PAT/PBT) 0.8 0.8 0.8 0.7 0.7
Cost of debt (PBT/EBIT) 1.0 1.0 1.0 1.0 1.0
EBIT margin (EBIT/Sales) 0.1 0.2 0.2 0.2 0.2
Asset turnover ratio (Sales/Assets) 1.1 1.1 1.2 1.2 1.1
Leverage ratio (Assets/Equity) 1.7 1.8 1.5 1.5 1.4
Operating ROE 21.2 25.3 28.7 23.8 21.5
Return ratios (%)RoCE (pre-tax) 15.4 18.3 23.9 22.2 20.6
Angel RoIC 18.6 21.5 30.4 29.5 28.8RoE 20.3 23.5 28.1 24.0 21.5
Turnover ratios (x)Asset turnover (fixed assets) 2.2 2.5 2.7 2.8 2.8
Receivables days 58 56 56 56 56
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Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement HCL Tech
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
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