Mehabe score: 4 G Factor: 3 Piotski Score: 8 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 8.
Description
HCL Tech is a leading global IT services company, which is ranked amongst the top five Indian IT services companies in terms of revenues. Since its inception into the global landscape after its IPO in 1999, HCL Tech has focused on transformational outsourcing, and offers an integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and BPO. The company leverages its extensive global offshore infrastructure and network of offices in 46 countries to provide multi-service delivery in key industry verticals.
Main Points
Segment wise revenue breakup. #
IT and Business Services – 72%
Engineering and R&D services – 17%
Products & Platforms – 12%Site:HCLTECHMain Symbol:HCLTECH
Stock trades at 1000.0, above its 50dma 972.0. It also trades above its 200dma 904.56. The stock remains bullish on techicals
The 52 week high is at 1073.55 and the 52week low is at 626.85
Price Chart
P/E Chart
Sales and Margin
Strengths
– is almost debt free.
– has been maintaining a healthy dividend payout of 21.50%
-‘s median sales growth is 19.49% of last 10 years
Weakness
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Competition
– The industry trades at a mean P/E of 30.8x. L & T Infotech trades at the industry’s max P/E of 37.98x. HCLTECH trades at a P/E of 24.4x
– Industry’s mean G-Factor is 3.7 while the mean Piotski score is 8.0. HCLTECH has a G-Factor of 3 and Piotski scoreof 8.
– Average 1 month return for industry is 3.7%. The max 1- month return was given by Mindtree: a return of 10.42 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 20068.0 cr compared to Rs 17842.0 cr for period ended Jun 2020, a rise of 12.5%
Operating Profits reported at Rs 5062.0 cr for period ended Jun 2021 vis-vis 4757.0 for period ended Jun 2020 .
Operating Margins contracted -143.8 bps for period ended Jun 2021 vis-vis Jun 2020 .
The EPS for Jun 2021 was Rs 11.81 compared to Rs 4.06 for previous quarter ended Mar 2021 and Rs 10.8 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 77605.0 cr for period ended TTM vis-vis sales of Rs 75379.0 cr for the period ended Mar 2021, a growth of 2.9%. The 3 year sales cagr stood at 8.7%.
Operating margins shrank to 26.0% for period ended TTM vis-vis 27.0% for period ended Mar 2021, contraction of 100.0 bps.
Net Profit reported at Rs 11419.0 cr for period ended TTM vis-vis sales of Rs 11145.0 cr for the period ended Mar 2021, rising 2.4%.
Company recorded a Net Profit CAGR of 4.1% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 19618.0 cr for period ended Mar 2021 vis-vis Rs 13359.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The stock has given a return of 61% on a 1 Year basis vis-vis a return of 26% over the last 3 Years. – The compounded sales growth on a TTM bassis is 7% vis-vis a compounded sales growth of 14% over the last 3 Years. – The compounded profit growth on a TTM basis is 2% vis-vis a compounded profit growth of 9% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 24.14% vis-vis 24.92% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 4.97% vis-vis 4.46% for Dec 2020
Conclusion
– is almost debt free.
– has been maintaining a healthy dividend payout of 21.50%
-‘s median sales growth is 19.49% of last 10 years –
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 972.0 and is trading at 1000.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
