HCL Tech surprises again, beats Dec qtr estimates with Rs 1,496 cr profit

HCL Technologies today announced a better-than-expected earnings for October-December, on the back of a surprise increase in operating margins.

The company’s consolidated net profit during the quarter rose 5.7 percent on quarter was Rs 1,496 crore, higher than a CNBC-TV18 poll estimate of Rs 1,453 crore. Its revenue was up 2.8 percent at Rs 8,184 crore compared with the estimate of Rs 8,126 crore.

Revenue in dollar terms, which came in at $1,321 million, also beat the expectations by a wide margin. The dollar revenue was up 4 percent over the previous quarter.

The EBIT margins at 23.7 percent too surprised on the higher side.

Reacting to the earnings, shares of the company rose nearly 3 percent to hit a record high of Rs 1,374.

“HCL continues its profitable growth trajectory with yet another stellar quarter of 4% QoQ revenues growth and 39.1% YoY net income growth. The company also crossed many milestones during the quarter, with our CY13 revenues crossing the $5bn landmark. In addition Infrastructure Services, Europe geography and Manufacturing vertical each crossed $1.5bn in revenues,” said Anant Gupta, President & CEO, HCL Technologies, in a press realease.

“This quarter we also made significant progress in the execution of our Digital System Integration Services strategy by signing new engagements and establishing dedicated Centers of Excellence to further strengthen our thought leadership and thrust on Gen 2 Outsourcing,” he added.

The operating efficiencies, the scale of business in our Run-the-Business offering and the optimization of G&A spend helped in pushing the net income margin to another high of 18.3% this quarter. The asset light model reflected by our Fixed asset turnover at 10x of revenues, and efficient working capital management, continued to keep the return on equity at a historic high of 35% and operating cash flows in excess of 100% of net income," said Anil Chanana, CFO.

Analysts on the CNBC-TV18 hailed the earnings as surprising. However, Bhavin Shah of Equirus Securities added a note of caution.

He said he remained cautious about the company’s balance sheet as half the revenue goes to account receivable and unbilled revenue is half of revenue.

Highlights:

Revenue in constant currency grew 3 percent.

Business from Europe and Americas was up 5 percent and 3.4 percent, respectively.

Infrastructure and business services verticals grew 4.8 percent and 11.4 percent. Engineering and R&D services at 2 percent and application services at 1.4 percent.

The company’s earnings growth was led by manufacturing and financial services verticals which grew 4.4 percent and 2.1 percent respectively.Public services grew 20.8 percent and retail & consumer packaged goods rose 6 percent.

The company has signed total contracts worth $1 billion during the quarter. It signed 15 transformational deals across various verticals. Financial and manufacturing verticals led the wins.

Top 5 clients of the company contributed 14.8 percent to the revenue during the quarter, top 10 contributed 23.8 percent and top 20 contributed33.6 percent.

As of 31 December, the company had 88,332 staff. The gross addition as of date was 7,593. Its IT services attrition stood at 16.6 percent, marginally higher than 16.1 percent in the quarter ago. Staff utilisation stood at 84.1 percent.

HCL Tech incurred a forex loss of Rs 158 crore during the quarter as against Rs 236 crore a quarter ago.