MOSL: HCL TECHNOLOGIES (Neutral)-Tepid momentum rests its hopes on large deals
HCL Technologies: Tepid momentum rests its hopes on large deals
(HCLT IN, Mkt Cap USD19.5b, CMP INR964, TP INR1100, 14% Upside, Neutral)
- Weak organic momentum…: HCLT’s 1QFY19 revenue grew 2.7% QoQ CC, marginally below our estimate of 3.2%. However, it included a contribution of 2pp from the acquisition of C3i and 0.6pp headwind from the India business. Excluding these factors, organic growth stood at 1.3% QoQ CC, indicating a soft start to the year. EBIT margin expanded 10bp QoQ to 19.7%, in line with our estimate of 19.9% (+30bp). PAT of INR24b grew 7.9% QoQ, a beat to our estimate of +5.5% QoQ, led by higher other income and lower ETR.
- …expected to turn led by deal wins: For FY19, HCLT maintained its guidance for CC revenue growth at 9.5-11.5%, compared to 8.5% YoY CC in 1Q. The ask rate is 2.45-3.65% through the rest of the year. HCLT saw the highest-ever deal bookings in the quarter, driving increased confidence on organic growth revival. However, it would prefer to see more deal closures in quarters to come in order to call out an inflection on organic growth.
HCL Technologies is a global IT services company working with clients in the areas that impact and redefine the core of their businesses. Co. focuses on 'transformational outsourcing', underlined by innovation and value creation, offering an integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and Business services. Co. leverages its extensive global offshore infrastructure and network of offices in 31 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare & Life sciences.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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