HCL tech has shown a QoQ (based on consolidated statements) growth of 9% in sales in 2QFY01. Net profit has risen by 29.2% compared to 1QFY01 due to a jump of 156% in other income . The higher other income is due to HCL Tech's unique business model where in it has strategic investment in other IT firms.
Internet and e-commerce revenues for the quarter stood at Rs 1,746 m comprising of 51% of the revenues compared to 41% in 1QFY01. Technology Development Services at Rs 1,515 m had a share of 44% of the revenues (34% in 1QFY01). It is quite opposite to Wipro’s performance. Wipro reversed its figures in favour of technology services. The share of R&D services grew from 49% is 2QFY01 to 51% in 3QFY01. HCL seems to have taken Internet and e-commerce more aggressively.
The combined contribution of Technology Development Services, Software Product Services and Networking Services (high value added services) was 77% of the total revenues. These areas typically have higher billing rates and therefore would mean higher profit margins. However, compared to industry standards HCL Tech’s profits margins at 30% are low, but the positive is that it has improved compared to the previous quarter.
Offshore centric revenues constitute 63% of 2QFY01 revenues the figure was same for the last quarter. The top 5, top 10 and top 20 customer contributed to 23%, 35% and 45% respectively to the revenues. Number of new customers added in the 2QFY01 was 18.The dot-com exposure was less that 5% of revenues. Thus, the company has de-risked its client portfolio.
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At a market price of Rs 745 the stock is trading at a P/E multiple of 41 times its 2QFY01 annualised earnings.
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