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HCL Infosystems: Consolidating on software - Views on News from Equitymaster
 
 
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  • Jan 18, 2001

    HCL Infosystems: Consolidating on software

    HCL Infosystems has seen a drop in its topline by 3% but its operating margins have improved compared to 1QFY01. The improvement in operating margins could be attributed to the increased proportion of software business. The contribution of services to the topline is 27%. The contribution of software services to revenues is 41% more compared to the contributions in the same quarter last year. The percentage of consolidated services revenue to total revenue during the first half is 23%.

    (Rs m) 1QFY01 2QFY01 Change
    Sales 2,926 2,826 -3.4%
    Other Income 21 4 -82.6%
    Expenditure 2,703 2,600 -3.8%
    Operating Profit (EBDIT) 222 226 1.9%
    Operating Profit Margin (%) 7.60% 8.01%  
    Interest 4 10 160.0%
    Depreciation 27 31 14.7%
    Profit before Tax 212 189 -11.0%
    Tax 20 14 -30.0%
    Profit after Tax/(Loss) 192 175 -9.1%
    Net profit margin (%) 6.6% 6.2%  
    Diluted number of shares 31.9 31.9  
    Diluted Earnings per share* 24.1 21.9  
    *(annualised)      

    The company is looking at growth based on its software services business. However, its hardware business (domestic products and services) is where 73% of the revenues come from. HCL Infosystems is the undisputed leader in the branded personal computer (PC) market with a share of 12.9% in volume terms and 18.6% in value terms.

    At a current market price of Rs 203 the stock is trading at a P/E multiple of 9.2 times its 2QFY01 annualised earnings.

     

     

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