Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
HCL Infosys: Where to from here? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 18, 2004

    HCL Infosys: Where to from here?

    Perhaps no other Indian technology company has provided as much returns to shareholders in the last year as HCL Infosystems (HCL Infosys), the largest personal computer (PC) maker in the country. Apart from the overall rally that was witnessed in the whole of 2003, HCL Infosys' shareholders were rewarded due to an impressive performance from the company. This was mainly aided by its office automation and telecommunication business that raked in a YoY growth of over 90% for the quarter ending December 2003.

    Note: Returns are calculated on Rs 100 invested on March 17, 2003

    Also aiding HCL's growth were its computer systems (PCs) & other related products and Internet & related services businesses. These grew YoY by 56% and 61% respectively in the December quarter. HCL Infosys is India's largest dealer for Nokia handsets and has gained tremendously from the rising demand for the same. As seen in the graph below, Nokia sales contribute to around 58% of the company's 1HFY04 revenues, up from 51% during FY03. With telephone penetration in India still at one of the lowest in the developing world, growth prospects for HCL are promising.

    Source: Company

    In recent times, the company has also benefited from the excise duty cuts announced by the government in its mini-budget. For instance, the government halved the excise duty on computers to 8% and also abolished the special additional duty of 4%. Customs duty on mobile handsets was also reduced from 10% to 5%. Also, the reduction in peak customs duty from 25% to 20% has benefited the company in growing sales of its office automation products like copiers, duplicators and projection systems. While these sops would help improve HCL Infosys' margins (as the company would spend lesser amounts on raw materials), they would also benefit the company in growing sales of its products (as the company would pass on these benefits to customers).

    More importantly, organised players like HCL Infosys have been affected by the presence of huge black and unorganized market. This reduction of customs and excise duties should narrow the price difference and the organised players are likely to gain market share. This is an extremely critical factor, as it would make organised players competitive.

    At the current price of Rs 760, the stock is trading at a P/E multiple of 16.4x annualised 1HFY04 earnings. The company has benefited from rising demand for PC and telecom products. While this is likely to continue as companies make larger investments in upgrading their hardware systems, HCL Infosys is also likely to benefit from the recent cuts in excise and customs duty. However, the growth of the company is highly dependent on rapidly changing technology. If it fails to keep pace with the same, valuations might be affected going forward. Investors, to that extent, need to apply caution.



    Equitymaster requests your view! Post a comment on "HCL Infosys: Where to from here?". Click here!


    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    HCL Tech: Ends FY17 on Expected Lines (Quarterly Results Update - Detailed)

    Jun 29, 2017

    Volvo partnership caps a good year for HCL Technologies.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)


    • Track your investment in HCL INFOSYS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts