HCL Technologies Ltd (Q3 F6/08): “Better positioned”

HCL Technologies Ltd (Q3 F6/08): "Better positioned"

CMP Rs246, BUY

Target price Rs283, Upside 15%

ä HCL reports a lower than expected 5.2% qoq dollar revenue growth. Volume growth slows down though pricing improvements continue.

ä Core software services registers solid growth of 6.5% qoq while IMS and BPO revenues grow by sluggish 1.5-2% qoq.

ä EBITDA margin expands by 90bps qoq to 22.3% driven by improved realizations, higher utilization, SG&A leverage and offshore shift. Core software services margin improves by 95 bps.

ä Lower other income, due to forex loss, leads to a net profit growth of just 1.1%.

ä Management maintains F6/08 revenue growth outlook at 35% yoy on a reduced headcount target. Company expects a modest Q4 F6/08.

ä Reiterate BUY on HCL Tech with a price target of Rs283 implying 15% upside.

Click below for the quarterly update of HCL Technologies Ltd.

http://www.indiainfoline.com/content/rep/Result_Analysis/2008/4/1642008/hcltech_0408.pdf

Warm Regards,

India Infoline Research Team

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