EUR 120.00 For Business Accounts Only

MOSL: Morning India (3/January/20): 1. HCL Technologies (Upgrade to Buy); 2. India Strategy (The Decade That Was); 3. Marico; 4. Automobiles - Dec-19 wholesales; 5. Media

MOrning India (3/January/20):  1. HCL Technologies (Upgrade to Buy); 2. India Strategy (The Decade That Was); 3. Marico;  4. Automobiles - Dec-19 wholesales; 5. Telecom

 

Today’s top research idea

HCL Technologies: Can it benefit from public cloud repatriation?

• Repatriation of workloads from public cloud to on-premise/hybrid cloud is likely to be a key emerging horizontal theme. Higher IMS exposure and stronger hybrid cloud capabilities make HCLT the biggest beneficiary. We expect up to ~5pp organic growth outperformance versus top 2 over FY21-22. Changes in the organization structure/GTM are showing early signs of success.
• We find comfort with - [1] HCLT's ability to build a completely independent sales team for products [2] No further M&A plans in Mode-3 in near term. Our conservative estimates (CAGR: -5%, OPM: 21%) on Mode-3 adequately capture our continued pessimism. Historically, valuations have shown strong correlation with organic growth, except for the recent cycle.
• Our TP of Rs 700 is arrived at using DCF based SOTP. This implies a marginal re-rating to 14x driven by further organic growth acceleration and concerns around Mode-3 receding. Upgrade to Buy.

Piping hot news

Steel producers raise prices by Rs 1,000-1,500 a tonne as demand perks up

Responding to cost pressure and greater demand, domestic steel producers have raised prices by Rs 1,000-1,500 a tonne across products for January. “Iron ore miners have increased prices by Rs 600 per tonne and so this increases the cost of production by Rs 1,000 a tonne. Hence, we have hiked prices from today (Thursday),” V R Sharma, managing director, Jindal Steel & Power (JSPL), told Business Standard.