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HCL Tech: Margins under pressure

Jan 22, 2002

HCL Technologies Ltd. that accounts for about 55% of the consolidated revenues of HCL Technologies and its subsidiaries has posted a 1% sequential growth in topline and a 7% decline in net profits for 2QFY02. The decline in net profits is due to operating margins falling and a lower other income figure. On a YoY basis, the revenues have declined by 4%, while the drop in bottomline is steeper at 12%. The operating margins have decline very sharply compared to 2QFY01. The figure has reduced from 52% as compared to 44% in 2QFY02.

(Rs m)1QFY022QFY02Change
Sales1,7801,7910.6%
Other Income 388 337 -13.1%
Expenditure9269876.6%
Operating Profit (EBDIT)854804-5.8%
Operating Profit Margin (%)48.0%44.9% 
Interest - -  
Depreciation 78 78 0.3%
Profit before Tax1,1641,063-8.7%
Tax 77 51 -33.5%
Profit after Tax/(Loss)1,0871,012-6.9%
Net profit margin (%)61.05%56.48% 
Diluted number of shares285.4285.4 
Diluted Earnings per share* 15.3 14.2 
P/E (x)   17.5  
*(annualised)   

At the current market price of Rs 248, the stock is trading at a P/E multiple of 18x its 2QFY02 estimated earnings. The results indicate that the tough market environment is taking a toll on the company’s financials. However, the markets track the company’s consolidated numbers, which are not available as yet. The expectations are based on the consolidated numbers. We will update the story as soon as we get the consolidated numbers.

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