india it services hcl technologies...hcl technologies 19 oct, 2020 centrum institutional research 3...
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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
Source: Company, Centrum Broking
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
Source: Company, Centrum Broking
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
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 3
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
Source: Company, Centrum Broking
Exhibit 2: Constant currency revenue growth QoQ (%)
Source: Company, Centrum Broking
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
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 4
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
Source: Company, Centrum Research
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
Source: Company, Centrum Broking
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
Source: Company, Centrum Broking
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
Source: Company, Centrum Broking
USD
vs
INR
EBIT
Mar
gin
s (%
)
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 5
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
Source: Company, Centrum Broking
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
Source: Company, Centrum Research
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
Source: Company, Centrum Research
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
Source: Company, Centrum Broking
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 6
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
Source: Company, Centrum Research
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 7
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%
Source: Company, Centrum Broking
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 8
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
Source: Company, Centrum Broking
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
Source: Company, Centrum Broking
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 9
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HCL Technologies 19 Oct, 2020
Centrum Institutional Research 10
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HCL Technologies
Source: Bloomberg
HCL Technologies 19 Oct, 2020
Centrum Institutional Research 11
HCL Technologies
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HCL Technologies 19 Oct, 2020
Centrum Institutional Research 12
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