Reviews

In this edition, we have reviewed S H Kelkar and Company and HCL Tech Limited. We suggest our reader-investors to HOLD S H Kelkar and Company and HCL Tech Limited.




We had recommended S H Kelkar and Company in Volume 37, Issue No. 3 dated January 3 to 16, 2022 under the ‘Low Scrip’ segment. The recommended price for the stock was ₹150.95. We had recommended the stock on the basis of leadership in the industry, high growth opportunities and focus on cost control. In British India in 1922, a company called Keva was first known as S H Kelkar and Company and it produced industrial perfumes. It is one of the biggest fragrance firms in India. 
 

Due to this, its business can easily service the needs of over 4,000 local and international clients. The company has paved the way for cutting-edge innovations like automatic blending which needs little to no human involvement and keeps formulas and trade secrets private. Both perfumes and the scent components used in them are produced by this company. As a result, it has a lot of flexibility to adapt to shifts in demand. Looking at the company’s quarterly results, its net sales were recorded at ₹412.40 crore in Q2FY23, posting a rise of 15.1 per cent. The operating profit for the quarter Q2FY23 stood at `60.44 crore as opposed to ₹54.94 crore, recording a decent gain of 10.01 per cent. 
 

The net profit for the quarter also witnessed a decent rise of 14.43 per cent in Q2FY23 and was recorded at ₹25.29 crore compared to ₹22.10 crore in Q2FY22. Analysing the company’s yearly performance, its net sales were to the tune of ₹1,559.60 crore in FY22, posting a gain of 18.59 per cent. On the other hand, theoperating profit posted a decline of 10.49 per cent and stood at ₹232.14 crore in FY22. As a result, the net profit for FY22 stood at ₹149.39 crore, recording a gain of 3.94 per cent. The company continues to make healthy progress on the global front as its team of master perfumers are working on multiple briefs across various brands and product categories.
 

Also, the company remains optimistic as regards the significant multi-year business potential from its global counterparts. On September 21, 2022, the company acquired 19 per cent stake in Holland Aromatics for a consideration of ₹36.9 crore (Euro 4.6 million), leading to a 81 per cent stake in Holland Aromatics while the balance 19 per cent stake is due for purchase next year. The group also acquired the balance 30 per cent stake in Nova for a consideration of ₹17.60 crore (Euro 2.2 million) through its wholly owned foreign subsidiary. The company has delivered steady revenue despite facing challenges. Hence, we recommend HOLD. 





We had recommended HCL Technologies in Volume 37, Issue No. 3 dated January 3 to 16, 2022 under the ‘Cover Story’ segment. The recommended price for the stock was ₹1,227.30. We had recommended the stock on the basis of sustainable demand momentum, strong deal pipeline and solid operating cash generation. HCL Tech, originally known as Hindustan Computers Limited and then HCL Technologies, is a Noidabased international provider of information technology (IT) services and consultancy. HCL Tech has a strong focus on transformational outsourcing and provides a broad range of services.
 

This includes software-led IT solutions, remote infrastructure management, engineering and research and development services and business process outsourcing (BPO). With nearly 210,966 people on board, the corporation operates offices in 52 different countries. With a market capitalisation of USD 50 billion as of September 2021, it is one of India’s top 20 most valuable publicly traded firms. Analysing the quarterly performance of the company, its net sales for Q2FY23 jumped 19.52 per cent to ₹24,686 crore as compared to ₹20,655 crore in Q2FY22. Also, the operating profit was recorded at ₹5,661 crore in Q2FY23 as opposed to ₹5,262 crores in Q2FY22.
 

The net profit also saw a positive movement of 6.68 per cent for Q2FY23 and stood at ₹3,487 crore as compared to ₹3,263 crore in Q2FY22. Furthermore, on the annual front its net sales witnessed a rise of 13.63 per cent YoY and stood at ₹85,651 crore. The operating profit was recorded at ₹21,597 crore with a gain of 2.97 per cent as compared to ₹20,975 crore in FY21. Thus, the net profit delivered excellent results of 21.09per cent and stood at ₹13,524 crore in FY22 as opposed to ₹11,169 crore in FY21. The total contract value (TCV) bookings were at USD 2.4 billion (up 6 per cent YoY and 16 per cent QoQ), including eight large service deals and three product deals. The annual contract value (ACV) was up 23.5 per cent YoY and 10.3 per cent QoQ. Other significant wins include a mega deal with an ACV of USD 125 million. 
 

Strong double-digit growth across industry verticals and healthy deal wins augur well for the company’s performance in the future. Further, its robust IMS capabilities and strategic partnerships along with strong hiring numbers are in its favour. After crossing a significant milestone in annual revenue of USD 10 billion in FY21, HCL Tech has increased revenue by 12.7 per cent in constant currency this year. The digital share of its services has gone up from 18.2 per cent to 34.5 per cent. The company has added a sizeable number of marquee clients during the past five years in a variety of revenue areas. Hence, we recommend HOLD.