India IT Services HCL Technologies...HCL Technologies 19 Oct, 2020 Centrum Institutional Research 3...

Please see Disclaimer for analyst certifications and all other important disclosures.

IT Service

s

Madhu Babu Analyst, IT Services

+91-22-4215 9855 [email protected]

Vaibhav Chechani Associate, IT Services

22-4215 9375 [email protected]

In

stitutio

nal R

esearch

Result Update

India I IT Services

19 Oct, 2020

BUY Price: Rs830

Target Price: Rs930 Forecast return: 12%

HCL Technologies Steady quarter with revenue and margin beat

Financial and valuation summary

HCL Tech 2QFY21 results beat our estimates on USD revenues and EBIT margin. PAT delivered a beat led by margin beat. Post steady 2QFY21, we model HCL Tech’s USD revenue growth at 1.3/12.2% for FY21/FY22E (vs 0.9/12.3% modelled earlier). We believe Infosys and HCL Tech would be the Tier IT vendors to report full year revenue growth in FY21 at 3.7/1.3% YoY respectively. TCS/ Wipro would show modest revenue decline in FY21. We model EBIT margins at 20.8/21/21.2% for FY21/FY22E/FY23E. Our EPS estimates are largely retained. stock trades at 16.1x FY22E EPS and 15x Sep22E EPS (TCS/Infosys trading at 26/21.5x Sep22E EPS). Retain HCL Tech TP at Rs930/sh (17x Sep22E EPS). Maintain BUY

Revenues deliver modest beat; Guides for 1.5-2.5% QoQ CC revenue growth for 3Q/4QFY21 Revenues came at USD2507mn were up 6.4% QoQ above estimates (Cen ests : USD2480mn). Constant currency revenue grew by 4.5% QoQ and above our estimates (cen ests : 3.8%). Mode1/Mode-2/Mode 3 services revenues grew by 4.3/6.9/2.1% QoQ in constant currency. Among verticals, Life science & Healthcare, Retail & CPG, Technology Services were up 8.6/8.4/6.3% QoQ. Company cited winning 15 transformational deals for the quarter. Management cited that deal pipeline for 2QFY21 is 20% higher than that of 1QFY21. HCL Tech guided for revenue growth of 1.5% -2.5% QoQ for the next two quarters. This implies full year revenue growth of 0.5-1.3% for FY21.

Margins beat estimates; guided for 20-21% EBIT margin for FY21 EBIT margin came at 21.6% up 110bps QoQ and above our estimate (Cen ests : 20.8%). PAT stood at Rs31.4bn was 5.4% above our estimates led by margin beat (Cen ests : Rs29.8bn). Headcount stood at 153,085 with net addition to 2798 employees QoQ. Management has guided for full year EBIT margin for FY21 at 20-21% (vs 19.5-20% earlier). Management also guided for giving staggered wage hikes to employees in 3Q and 4QFY21. Among service lines, Mode 1/Mode2/Mode 3 EBIT margin stood at 20.9/18.5/28.7% up 150/110/(20) bps QoQ. We note 1HFY21 has been bumper quarter for margins for most Tier 1 IT vendors as Work from Home led cost savings, lower travel costs, absence of marketing and promotion event expenses led to substantial cost savings. We believe that as Work from Home delivery moves to steady state post Covid (Assuming April 2021 onwards), clients could ask for cost savings to be passed on through lower pricing. With 50-60% of revenues for Tier 1 IT vendors being derived from fixed price projects, we believe new deals in FY22 would gradually be bid at lower blend rates as vendors price contracts taking their target margin assumption in bids.

Valuation: HCL Tech Stock trades at 15x Sep22E EPS which is 42% discount to TCS HCL tech cited doubling dividend per quarter to Rs4/sh (vs Rs2/sh given per quarter earlier). This implies annual dividend of Rs16/sh (Dividend yield of 1.9%). We expect HCL Tech FCF at Rs142bn in FY22 (Rs52/sh) assuming there is no major acquisition. Paying Rs16/sh in dividend would cost Rs43.7bn in FY22.This is just 31% of free cash flow of FY22. Peer TCS is paying almost 100% of FCF as dividends. HCL already now has net cash of Rs134bn on balance sheet ( 6% of Mcap). Hence, while company only doubled quarterly dividend, we believe company is well poised to announce Buyback in 4QFY21 or in FY22. While HCL Tech was organic growth leader among Tier 1 IT vendors in FY20, company could show performance in FY21 next only to Infosys. Strong margin execution and gradual improvement in payouts will drive further re-rating. Maintain BUY.

Market Data

Bloomberg: HCLT IN

52 week H/L: 914/375

Market cap: Rs2244.6bn

Shares Outstanding: 2713.7mn

Free float: 39.7%

Avg. daily vol. 3mth: 9942824 Source: Bloomberg

Changes in the report

Rating: BUY

Target price: Retained at Rs930

EPS: Retained for FY21/FY22E Source: Centrum Broking

Shareholding pattern

Jun-20 Mar-20 Dec-19 Sep-19

Promoter 60.3 60.3 60.0 60.0

FIIs 25.6 26.4 27.7 28.0

DIIs 7.8 7.0 6.5 5.9

Public/other 6.3 6.2 5.9 6.2

Source: BSE

Centrum estimates vs Actual results

YE Mar (Rs mn)

Centrum Q2FY21

Actual Q2FY21

Variance (%)

Revenue 1,84,002 1,85,940 1.1

EBIT 38,295 40,186 4.9

EBIT margin 20.8% 21.6% 80bps

Adj. PAT 29,837 31,446 5.4

Source: Bloomberg, Centrum Research Estimates

YE Mar (Rs mn) 2QFY21A 2QFY20A YoY (%) 1QFY21A QoQ (%) FY20A FY21E FY22E

Revenues 1,85,940 1,75,280 6.1 1,78,410 4.2 7,06,780 7,50,738 8,23,557

EBIT 40,186 34,970 14.9 36,600 9.8 1,38,521 1,56,503 1,74,642

EBIT margin (%) 21.6% 20.0% 166bps 20.5% 110bps 19.6% 20.8% 21.2%

Net profit 31,446 26,590 18.3 29,230 7.6 1,10,931 1,23,710 1,39,607

EPS (Rs) 11.6 19.6 (40.9) 10.8 7.6 40.9 45.6 51.4

EPS growth (%) 11.3% 12.2% 12.2%

PE (x) 19.4 17.4 15.5

EV/EBITDA (x) 12.5 10.7 9.6

PBV (x) 4.4 3.8 3.2

RoE (%) 24.0 22.0 21.5

RoCE (%) 22.2 20.1 19.6

Source: Company, Centrum Broking

HCL Technologies 19 Oct, 2020

Centrum Institutional Research 2

Thesis Snapshot

Estimate revision Valuations

YE Mar (Rs mn) FY21E

New FY21E

Old % chg

FY22E New

FY22E Old

% chg

USD Revenue 10,064 10,020 0.4 11,293 11,282 0.1

Revenue 7,50,738 7,50,738 0.0 8,23,557 8,23,557 (0.0)

EBIT 1,56,503 1,56,503 (0.0) 1,74,642 1,74,642 (0.0)

EBIT margin (%) 20.8 20.8 (0.00) 21.2 21.2 (0.00)

Adj. PAT 1,23,710 1,23,710 0.0 1,39,607 1,39,607 0.0


HCL Tech versus NIFTY 50 1m 6m 1 year

HCLT IN 4.8 79.9 50.3

NIFTY 50 1.4 30.8 2.6

Source: Bloomberg, NSE

Key assumptions Y/E Mar FY21E FY22E

USD Revenue Growth 1.3 12.2

Average exchange rate 74.9 73.0

EBITDA Margin(%) 25.8 25.2

EBIT Margin (%) 20.8 21.0 Source: Company, Centrum Broking

We value HCL Tech at 17x Sep 22E EPS which yields a target price of Rs930/sh

Valuations Rs/share

Sep22E EPS 55

Target multiple 17

Target Price 930

P/E mean and standard deviation


Peer comparison

Company Mkt Cap

Rs mn

CAGR FY20-FY22E (%) PE (x) RoE (%)

Sales( USD) EBIT PAT FY20 FY21E FY22E FY20 FY21E FY22E

HCL Tech 2,250 9.4 13.6 11.3 20.3 18.1 16.1 24.0 22.4 21.6

TCS 10,370 5.4 8.3 7.7 32.6 32.3 28.1 36.4 37.5 42.2

Infosys 4,780 8.3 15.0 12.2 29.2 25.6 23.1 25.5 27.4 27.6

Wipro 1,930 2.2 4.9 4.4 21.1 19.6 18.1 17.4 17.9 18.1 Source: Company, Centrum Broking



Quarterly result review Exhibit 1: Q2FY21: Consolidated P&L

(Rs bn) Q2FY21 Q1FY21 QoQ (%) Q2FY20 YoY (%) Estimate Variance

USD revenue 2,507 2,355 6.4 2,486 0.8 2,480 1.1

Consolidated revenue 1,85,940 1,78,410 4.2 1,75,280 6.1 1,84,002 1.1

EBIT 40,186 36,600 9.8 34,970 14.9 38,295 4.9

EBIT margin (%) 21.6% 20.5% 110bps 20.0% 166bps 20.8 80bps

APAT 31,446 29,230 7.6 26,590 18.3 29,837 5.4


Exhibit 2: Constant currency revenue growth QoQ (%)


Exhibit 3: Constant currency revenue growth YoY (%)

Source: Company, Centrum Research

3.2

%

6.2

%

2.7

%

2.9

%

1.2

% 2.1

%

1.7

%

6.0

%

2.8

%

3.0

% 3.8

%

2.6

%

0.9

%

3.3

%

1.2

% 2.7

%

3.0

%

5.6

%

3.3

% 4.2

%

6.0

%

2.1

%

0.8

%-7

.2%

4.5

%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Q1

FY1

5

Q2

FY1

5

Q3

FY1

5

Q4

FY1

5

Q1

FY1

6

Q2

FY1

6

Q3

FY1

6

1Q

FY1

7

Q2

FY1

7

Q3

FY1

7

Q4

FY1

7

1Q

FY1

8

Q2

FY1

8

Q3

FY1

8

Q4

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

1Q

FY2

0

2Q

FY2

1

16

.2%

15

.4%

16

.0%

13

.5%

9.3

%

8.1

% 11

.2%

12

.8%

13

.8%

16

.1%

12

.2%

10

.6%

11

.2%

10

.5%

8.5

%

8.9

%

13

.0%

15

.3%

17

.0% 2

0.5

%

16

.4%

13

.5%

1.0

% -0.4

%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Rev

enu

e…

Q2

FY1

5

Q3

FY1

5

Q4

FY1

5

Q1

FY1

6

Q2

FY1

6

Q3

FY1

6

1Q

FY1

7

Q2

FY1

7

Q3

FY1

7

Q4

FY1

7

1Q

FY1

8

Q2

FY1

8

3Q

FY1

8

Q4

FY1

8

1Q

FY1

9

2Q

FY1

9

3Q

FY1

9

4Q

FY1

9

1Q

FY2

0

2Q

FY2

0

3Q

FY2

0

4Q

FY2

0

1Q

FY2

1

2Q

FY2

1



Strong execution on margins: EBIT margin came at 21.6% up 110bps QoQ. For FY21E, company guided for EBIT margin guidance at 20 to 21%. This would require gradual improvement and steady execution over coming quarters.

Exhibit 4: EBIT margin Vs Average exchange rate


Exhibit 5: Break of revenues by services

USD mn FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Mode 1 6,004 1,507 1,512 1,561 1,606 1,662 1,665 1,679 1,656 1494 1,587

Mode 2 1,152 321 336 377 430 444 455 462 488 479 524

Mode 3 682 227 251 263 242 258 365 402 400 382 396


Exhibit 6: As a percentage of total revenues (%)

% Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Mode 1( Applications , IMS and ERP) 70.9 70.5 70.3 67 66 65.1 63.4 63.3

Mode 2 (Digital, Cloud , Iot) 17.1 18.9 18.8 18.3 18.2 19.2 20.3 20.9

Mode 3 (Platforms and IP) 11.9 10.6 10.9 14.7 15.8 15.7 16.2 15.8


Exhibit 7: EBIT margins of each SBU’s

% Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Mode 1 21.2 20.7 20.5 17.8 20.0 19.9 19.6 19.4 20.9

Mode 2 10.8 12.3 13.1 13.2 14.0 15.2 18.1 17.4 18.5

Mode 3 24.4 23.0 18.8 19.0 27.1 27.3 29.6 28.9 28.7


USD

vs

INR

EBIT

Mar

gin

s (%

)



Key metrics

Exhibit 8: Geography mix (%)

% 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

America 62.40 63.50 61.60 64.50 65.80 64.40 62.9 67.7 67.9 62.8 63.4 63.7 63.1

Europe 29.10 28.70 30.00 28.10 26.80 28.20 29.7 25.9 25.7 29.2 28.7 28.3 28.4

Asia Pacific 8.50 7.90 8.50 7.50 7.40 7.30 7.4 6.3 6.4 8.0 7.9 8.0 9.0


Exhibit 9: Vertical mix (%)

% 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Financial Services 24.6 25.0 23.8 23.0 21.6 21.1 20.3 22.4 21.6 21.1 22.4 22.1

Manufacturing+ Technology 36.5 36.0 36.5 36.2 36.4 36.2 38.8 35.2 36.0 36.9 35.3 35.0

Life science and Healthcare 11.7 11.5 12.8 12.9 13.0 13.0 12.8 12.9 12.2 12.5 13.7 14.1

Public services 10.2 10.6 10.5 10.7 9.7 11.1 10.5 11.0 10.9 11.1 11.0 10.7

Retail and CPG 9.6 9.6 9.1 10.0 10.2 10.0 9.5 10.0 10.3 10.2 10.0 10.4

Telecommunication, Media, Publishing Entertainment

7.4 7.4 7.3 7.2 9.2 8.6 8.0 8.4 9.0 8.3 7.6 7.7

Others NA NA NA NA 0.0 NA NA N.A N.A. N.A. N.A N.A


Exhibit 10: Service wise revenue and growth (%)

USD mn Q2FY21 Q1FY21 QoQ growth (%) Q2FY20 YoY growth (%)

IT and Business Services 1,775 1,653 7.3 1,775 0.0

Engineering and R&D Services 394 377 4.4 420 (6.3)

Products & Platforms 338 325 4.1 291 16.4

Total revenues 2,507 2,355 6.4 2,486 0.8


Exhibit 11: Headcount details

% 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

Total employee count 1,19,040 1,19,291 1,20,281 1,24,121 1,27,875 1,32,328 1,37,965 1,43,900 1,47,123 1,49,173 1,50,423 1,50,287 1,53,085

% Growth 1.1 0.2 0.8 3.2 3.0 3.5 4.3 4.3 2.2 1.4 0.8 (0.1) 1.9

Net additions 1,259 251 990 3,840 3,754 4,453 5,637 5,935 3,223 2,050 1,250 (136) 2,798

Attrition ( LTM) 15.7 15.2 15.5 16.3 17.1 17.8 17.7 17.3 16.9 16.8 16.3 14.6 12.2




Exhibit 12: Quarterly Financials

Particulars (Rs mn) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21

USD Revenues 2,099 2,202 2,278 2,364 2,486 2,543 2,543 2,355 2,507

Net Sales 1,48,610 1,56,990 1,59,900 1,64,250 1,75,280 1,81,350 1,85,900 1,77,803 1,85,940

Cost of Revenue 95,890 1,01,520 1,04,210 1,09,200 1,13,860 1,15,100 1,14,790 1,10,321 1,12,790

Sales and Marketing

17,730 19,000 19,720 21,059 20,390 21,550 23,910 21,978 23,640

EBITDA 34,990 36,470 35,970 34,034 40,935 44,700 47,200 45,504 49,510

Depreciation 5,330 5,610 5,580 5,950 6,060 8,000 8,390 9,037 9,350

EBIT 29,660 30,860 30,390 28,084 34,875 36,700 38,810 36,467 40,160

Forex gains 690 (540) 230 190 (100) 540 230 - 1,390

Other Income 1,830 1,590 1,290 1,090 70 130 (360) 2,046 (30)

PBT 32,180 31,910 31,910 29,364 34,845 37,370 38,680 38,513 41,520

Tax 6,780 5,660 6,150 7,050 8,350 6,910 7,070 9,264 9,990

Minority interest - 140 80 - - - 80 - 110

Reported PAT 25,400 26,110 25,680 22,240 26,484 30,460 31,530 29,120 31,420

Adjusted PAT 25,400 26,110 25,680 22,240 26,484 30,460 31,530 29,120 31,420

QoQ growth (%)

USD Revenues 2.1 4.9 3.5 3.8 5.1 2.3 0.0 -7.4 6.4

Revenue 7.1 5.6 1.9 2.7 6.7 3.5 2.5 -4.4 4.2

EBITDA 8.5 4.2 (1.4) (5.4) 20.3 9.2 5.8 -3.7 8.5

PBT 6.3 (0.8) - (8.0) 18.7 7.2 3.7 -0.5 7.5

Adj PAT 5.7 2.8 (1.6) (13.4) 19.1 14.7 3.9 -7.9 7.6

Margin (%)

EBITDA 23.5 23.2 22.5 20.7 23.4 24.6 25.4 25.6 26.6

EBIT 20.0 19.7 19.0 17.1 19.9 20.2 20.9 20.5 21.6

PBT 21.7 20.3 20.0 17.9 19.9 20.6 20.8 21.7 22.3

Adj PAT 17.1 16.6 16.1 13.5 15.1 16.8 17.0 16.4 16.9




Exhibit 13: Consolidated Model Sheet

YE Mar (Rs mn) FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E

Revenues- USD mn 6,236 6,975 7,838 8,633 9,936 10,064 11,293 12,555

Growth (%) 7.1 11.9% 12.4% 10.2% 15.1% 1.3% 12.2% 11.2%

Organic growth 6.4% 5.5% 9.0% 1.3% 12.2% 11.2%

Average exchange rate (USD vs INR) 66.5 67.2 64.5 70.0 71.1 74.9 73.0 73.0

Consolidated revenues (Rs mn) 416,521 4,68,365 5,05,700 6,04,280 7,06,780 7,54,072 8,24,389 9,16,519

Growth (%) 12.3% 49.9% 8.0% 19.5% 17.0% 6.7% 9.3% 11.2%

EBITDA (Rs mn) 91,114 1,03,330 1,14,400 1,39,690 1,66,921 1,94,581 2,08,157 2,28,032

EBIT (Rs mn) 85,164 94,957 99,880 1,18,210 1,38,521 1,57,133 1,73,336 1,94,744

PAT (Rs mn) 75,766 84,750 87,820 1,01,230 1,10,931 1,24,495 1,39,669 1,58,935

EBITDA Margins (%) 21.9 22.1% 22.6% 23.1% 23.6% 25.8% 25.2% 24.9%

EBIT Margins (%) 20.4 20.3% 19.8% 19.6% 19.6% 20.8% 21.0% 21.2%

NPM (%) 18.2 18.1% 17.4% 16.8% 15.7% 16.5% 16.9% 17.3%

EPS 26.8 30.0 31.5 36.7 40.9 45.9 51.5 58.6

Growth (%) 4.5 11.7% 5.2% 16.5% 11.3% 12.2% 12.2% 13.8%

P/E 19.0 27.7 26.3 22.6 20.3 18.1 16.1 14.2

EV/EBITDA 14.6 21.8 19.6 15.9 13.1 10.9 9.7 8.3

Consolidated balance sheet (Rs mn)

Net cash on balance sheet (Rs mn) 1,08,792 97,791 62,980 64,760 97,220 1,58,717 2,65,678 3,88,268

Net cash per share 38.6 34.6 22.6 23.5 35.8 58.5 97.9 143.1

Net cash per share/ Stock price 7.6% 4.2% 2.7% 2.8% 4.3% 7.0% 11.8% 17.2%

Consolidated cash flows (R mn)

Cash flow from operations 41,868 89,951 83,280 89,710 1,33,590 1,70,941 1,65,930 1,79,863

Capex + Acquisitions (20,999) (44,096) (55,950) (62,930) (79,570) (76,850) (23,928) (14,000)

Free cash flows 20,869 45,856 27,330 26,780 54,020 94,091 1,42,002 1,65,863

FCF Yield 1.5% 2.0% 1.2% 1.2% 2.4% 4.2% 6.3% 7.4%




P&L YE Mar (Rs mn) FY18A FY19A FY20A FY21E FY22E

Revenues 5,05,700 6,04,280 7,06,780 7,54,072 8,24,389

Operating Expense 3,32,370 3,92,680 4,52,950 4,68,996 5,23,579

Employee cost 58,930 71,910 86,909 90,496 92,653

EBITDA 1,14,400 1,39,690 1,66,921 1,94,581 2,08,157

Depreciation & Amortisation 14,520 21,480 28,400 37,448 34,821

EBIT 99,880 1,18,210 1,38,521 1,57,133 1,73,336

Interest expenses 0 0 0 0 0

Other income 11,110 8,050 1,790 6,713 10,439

PBT 1,10,990 1,26,260 1,40,311 1,63,846 1,83,774

Taxes 23,170 24,810 29,380 39,351 44,106

Effective tax rate (%) 20.9 19.6 20.9 24.0 24.0

PAT 87,820 1,01,450 1,10,931 1,24,495 1,39,668

Minority/Associates - 220 - - -

Recurring PAT 87,820 1,01,230 1,10,931 1,24,495 1,39,668

Extraordinary items 0 0 0 0 0

Reported PAT 87,820 1,01,230 1,10,931 1,24,495 1,39,668

Ratios YE Mar FY18A FY19A FY20A FY21E FY22E

Growth (%)

Revenue 8.0 19.5 17.0 6.7 9.3

EBITDA 10.7 22.1 19.5 16.6 7.0

Adj. EPS 3.6 15.3 9.6 12.2 12.2

Margins (%)

Gross 34.3 35.0 35.9 37.8 36.5

EBITDA 22.6 23.1 23.6 25.8 25.2

EBIT 19.8 19.6 19.6 20.8 21.0

Adjusted PAT 17.4 16.8 15.7 16.5 16.9

Returns (%)

ROE 25.3 26.0 24.0 22.4 21.6

ROCE 22.6 23.4 22.2 20.4 19.5

ROIC 29.7 29.6 28.7 27.6 30.0

Turnover (days)

Debtors 70 71 73 60 55

Unbilled 19 18 19 17 17

Debtors + Unbilled 88 88 92 77 72

Solvency (x)

Net debt-equity (0.3) (0.2) (0.2) (0.1) (0.2)

Per share (Rs)

Adjusted EPS 31.5 36.7 40.9 45.9 51.5

BVPS 130.7 150.3 188.9 220.6 255.9

CEPS 36.8 44.6 51.3 59.7 64.3

DPS 4.0 4.0 9.0 14.0 16.0

Dividend payout (%)(Ex-Buyback) 15.3% 13.1% 26.5% 31.0% 31.3%

Valuation (x)

P/E 26.3 22.6 20.3 18.1 16.1

EV/EBITDA 19.6 15.9 13.1 10.9 9.7

Dividend yield (%) 0.5 0.5 1.1 1.7 1.9


Balance sheet YE Mar (Rs mn) FY18A FY19A FY20A FY21E FY22E

Equity share capital 2,780 2,710 5,430 5,430 5,430

Reserves & surplus 3,61,080 4,10,950 5,07,240 5,93,142 6,89,094

Shareholders fund 3,63,860 4,13,660 5,12,670 5,98,572 6,94,524

Minority Interest 0 1,030 1,540 1,540 1,540

Total debt 5,840 35,130 62,210 62,210 62,210

Def tax liab. (net) 340 2,260 870 870 870

Total liabilities 3,70,040 4,52,080 5,77,290 6,63,192 7,59,144

Net block 45,600 52,930 54,940 48,412 45,231

Capital WIP 3,200 2,350 4,000 4,000 4,000

Goodwill 67,990 90,610 1,61,540 1,61,540 1,61,540

Intangible Assets 73,940 85,340 1,58,420 2,04,350 1,96,638

Investments 25,550 32,750 42,790 42,990 43,190

Deferred Tax Assets 18,370 24,550 23,170 23,170 23,170

Sundry debtors 96,390 1,17,060 1,41,310 1,23,957 1,24,223

Unbilled Revenue 26,180 29,040 36,380 35,121 38,396

Cash & Cash Equivalents 63,750 1,00,920 1,19,650 1,80,947 2,87,708

Other current assets 59,260 50,200 86,860 92,360 95,860

Trade payables 75,240 82,550 1,55,060 1,54,946 1,58,102

Other current liab. & prov 34,950 51,120 96,710 98,710 1,02,710

Net current assets 1,35,390 1,63,550 1,32,430 1,78,729 2,85,375

Total assets 3,70,040 4,52,080 5,77,290 6,63,192 7,59,144

Cashflow YE Mar (Rs mn) FY18A FY19A FY20A FY21E FY22E

Operating profit before WC

changes 1,19,180 1,40,580 1,74,770 1,95,495 2,10,121

Trade & other receivables (10,060) (35,180) (31,620) 12,912 (7,241)

Trade payables (2,280) 10,520 16,020 1,886 7,156

Net change - WC (12,340) (24,660) (15,600) 14,798 (85)

Direct taxes 23,560 26,210 25,580 39,351 44,106

Net cash from operating

activities 83280 89710 133590 170941 165930

Capital expenditure (3,314) (34,650) (18,660) (76,850) (23,928)

Acquisitions (12,451) (28,280) (60,910) - -

Others 33120 32200 -44170 5799 8475

Net Cash from investing

activities 17,355 (30,730) (1,23,740) (71,051) (15,453)

Net free cash flows 67515 26780 54020 94091 142002

Issue of share capital (35,300) (37,460) (2,950) - -

Debt change (1,530) 35,960 (12,480) - -

Dividend paid (20,310) (13,210) (16,250) (38,593) (43,717)

Net cash from financing

activities (57,140) (14,710) (31,680) (38,593) (43,717)

Effect of Exchange Rate on

Cash and Cash Equivalents 470 (1,830) 420 - -

Net change in cash 43,965 42,440 (21,410) 61,297 1,06,761

Net cash from financing (56,670) (16,540) (31,260) (28,513) (47,567)

Net change in Cash 3,780 42,440 (21,410) 23,494 64,490




Disclaimer

Centrum Broking Limited (“Centrum”) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and National Stock Exchange of India Ltd. (NSE). Our holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As a group Centrum has Investment Banking, Advisory and other business relationships with a significant percentage of the companies covered by our Research Group. Our research professionals provide important inputs into the Group's Investment Banking and other business selection processes. Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other businesses and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of this material/report. Our Company and Group companies and their officers, directors and employees, including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates do not own 1% or more in the equity of this company Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We and our Group may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of Centrum. Centrum or its affiliates do not make a market in the security of the company for which this report or any report was written. Further, Centrum or its affiliates did not make a market in the subject company’s securities at the time that the research report was published. This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information of the clients of Centrum. Though disseminated to clients simultaneously, not all clients may receive this report at the same time. Centrum will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by or on behalf of the Company, Centrum, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. Centrum does not provide tax advice to its clients, and all investors are strongly advised to consult regarding any potential investment. Centrum and its affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Foreign currencies denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk. Certain transactions including those involving futures, options, and other derivatives as well as non-investment-grade securities give rise to substantial risk and are not suitable for all investors. Please ensure that you have read and understood the current risk disclosure documents before entering into any derivative transactions. This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions or information in this report change. This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the public media without the express written consent of Centrum. This report or any portion hereof may not be printed, sold or distributed without the written consent of Centrum. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Neither Centrum nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your information, may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The distribution of this report in other jurisdictions may be restricted by law and persons into whose possession this report comes should inform themselves about, and observe any such restrictions. By accepting this report, you agree to be bound by the fore going limitations. No representation is made that this report is accurate or complete.



The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Centrum Broking and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection. This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith. Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. Centrum and affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for service in respect of public offerings, corporate finance, debt restructuring, investment banking or other advisory services in a merger/acquisition or some other sort of specific transaction. As per the declarations given by them, Mr. Madhu Babu & Mr. Vaibhav Chechani, research analyst and and/or any of their family members do not serve as an officer, director or any way connected to the company/companies mentioned in this report. Further, as declared by them, they are not received any compensation from the above companies in the preceding twelve months. They do not hold any shares by them or through their relatives or in case if holds the shares then will not to do any transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our employees and are paid a salary. They do not have any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the time of publication of the research report or at the time of the public appearance. While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Centrum from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Centrum Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be distributed in Canada or used by private customers in United Kingdom. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market.

Ratings definitions

Our ratings denote the following 12-month forecast returns:

Buy – The stock is expected to return above 15%.

Add – The stock is expected to return 5-15%.

Reduce – The stock is expected to deliver -5-+5% returns.

Sell – The stock is expected to deliver <-5% returns.

HCL Technologies

Source: Bloomberg



HCL Technologies

4 Whether Research analyst’s or relatives’ have any financial interest in the subject company and nature of such financial interest No

5 Whether Research analyst or relatives have actual / beneficial ownership of 1% or more in securities of the subject company at the end of the month immediately preceding the date of publication of the document.

No

6 Whether the research analyst or his relatives has any other material conflict of interest No

7 Whether research analyst has received any compensation from the subject company in the past 12 months and nature of products / services for which such compensation is received

No

8 Whether the Research Analyst has received any compensation or any other benefits from the subject company or third party in connection with the research report

No

9 Whether Research Analysts has served as an officer, director or employee of the subject company No

10 Whether the Research Analyst has been engaged in market making activity of the subject company. No

11 Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past twelve months; No

12 Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months;

No

13 Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months;

No

Member (NSE and BSE). Member MSEI (Inactive)

Single SEBI Regn No.: INZ000205331

Depository Participant (DP) CDSL DP ID: 120 – 12200

SEBI REGD NO.: CDSL: IN-DP-CDSL-661-2012

PORTFOLIO MANAGER

SEBI REGN NO.: INP000004383

Research Analyst SEBI Registration No. INH000001469

Mutual Fund Distributor

AMFI REGN No. ARN- 147569

Website: www.centrum.co.in Investor Grievance Email ID: [email protected]

Compliance Officer Details:

Ashok D Kadambi (022) 4215 9937; Email ID: [email protected]

Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)

Registered Office Address Bombay Mutual Building, 2nd Floor, Dr. D. N. Road, Fort, Mumbai - 400 001

Corporate Office & Correspondence Address Centrum House

6th Floor, CST Road, Near Vidya Nagari Marg, Kalina, Santacruz (E), Mumbai 400 098.

Tel: (022) 4215 9000 Fax: +91 22 4215 9344

Disclosure of Interest Statement

1 Business activities of Centrum Broking Limited (CBL)

Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL and a SEBI registered Portfolio Manager.

2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.

3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)



Centrum Broking Institutional Equities Team Details

Nischal Maheshwari CEO [email protected] +91-22-4215 9841

Research Analyst Sector E-mail Phone number

Gaurav Jani BFSI [email protected] +91-22-4215 9110

Milind S Raginwar Cement & Metals [email protected] +91-22-4215 9201

Shirish Pardeshi FMCG [email protected] +91-22-4215 9634

Ashish Shah Infra & Aviation [email protected] +91-22-4215 9021

Madhu Babu IT [email protected] +91-22-4215 9855

Probal Sen Oil & Gas [email protected] +91-22-4215 9001

Cyndrella Carvalho Pharma [email protected] +91-22-4215 9643

Sparsh Chhabra Economist [email protected] +91-22-4215 9035

Joaquim Fernandes Quant [email protected] +91-22-4215 9363

Equity Sales Designation Email Phone number

Rajesh Makharia Director [email protected] +91-22-4215 9854

Paresh Shah MD [email protected] +91-22-4215 9617

Anil Chaurasia Sr. VP [email protected] +91-22-4215 9631

Himani Sanghavi AVP [email protected] +91-22-4215 9082

Saahil Harwani Associate [email protected] +91-22-4215 9623

mailto:[email protected]




























India IT Services HCL Technologies...HCL Technologies 19 Oct, 2020 Centrum Institutional Research 3...

Documents

Transcript of India IT Services HCL Technologies...HCL Technologies 19 Oct, 2020 Centrum Institutional Research 3...