HCL Tech, Leading The Industry Growth Trajectory

HCL Technologies announced their quarterly results for the quarter ended 30 September 2012, on 17 October 2012. The result was better than street expectations and sent the stock to a 52 week high, at 605.75, resulting out of an intraday upward movement of 3.68 per cent.

HCL Tech announced a sequential growth in revenue of 3.17 per cent. This had the topline increasing from USD 1.0796 billion in the quarter ended 30 June 2012 to USD 1.1138 billion in the quarter ended 30 September 2012. The growth in EBIT was in line with this, resulting in a decline in operating profit margin by 1 basis point. Net profit of the company jumped from USD 155.8 million in the quarter ended 30 June 2012 to USD 161.8 million in the quarter ended 30 September 2012, marking a rise in the net profit margin of 10 basis points, it reaching 14.52 per cent.

What impressed markets largely was the volume growth of HCL Tech which stands at 4.5 per cent sequentially. Infrastructure services which contributed to 26.6 per cent of the company’s revenues in the quarter under review grew by a robust 10.37 per cent. The company also reported a diluted EPS of Rs.49.10 which is a 2.51 per cent increase from the Rs.47.9 see in the previous quarter.

In terms of verticals, there was growth seen in Financial Services, Healthcare, Retail & CPG (Consumer Packaged Goods) and Media, Publishing and Entertainment. In terms of geography, there was growth seen coming from the U.S. In all, the company added 38 clients in this quarter which is a massive reduction from the 50 additions seen in the previous quarter. The number of active clients however remained the same, at 536.

On the operational front, the attrition rate was seen declining for IT services, from 14.0 per cent to 13.6 per cent while it increased for BPO services, from 6.9 per cent to 7.3 per cent. Utilisation overall saw an increase indicating commencement of new work.

Though HCL Tech’s results were robust overall, the stock price ended the day at 579.70, lower by 0.87 per cent due to profit booking. On a whole, results have been strong, the company is well positioned on its focus verticals and it has been leading the pack on consistent outperformance. We thus maintain our positive outlook on the company’s prospects.