HCL Infosystems: Margins under pressure - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

HCL Infosystems: Margins under pressure

Apr 18, 2002

In 3QFY02, HCL Infosystems has managed to arrest the decline in topline that was seen for first half of FY02. The company has posted a 4.5% growth in topline on a YoY basis. However, falling operating margins have caused the company’s net profits to decline by 45%. HCL earns around 55% of its revenues from PC sales. FY02 has been a bad year, considering the fact that MAIT expects PC sales to decline 12% decline in volumes during the fiscal. The PC manufacturers have been doubly hit due to realisations (Rs per PC) declining sharply as a consequence of a price war triggered by intense competition. The average realisation per PC declined to Rs 27,520 a drop of 20% as compared to the corresponding period last year in 1HFY02.

According to IDC, HCL Infosystems was the largest seller of desktop PCs in India for the year 2001. HCL Infosystems had an 8.6% market share. During the fiscal the calendar year the company saw a 27% growth in volumes.

(Rs m) 3QFY01 3QFY02 Change 9mFY01 9mFY02 Change
Sales 3,362 3,514 4.5% 9,114 8,588 -5.8%
Other Income 26 33 28.0% 51 83 63.3%
Expenditure 3,147 3,370 7.1% 8,450 8,132 -3.8%
Operating Profit (EBDIT) 215 144 -33.3% 664 455 -31.4%
Operating Profit Margin (%) 6.4% 4.1%   7.3% 5.3%  
Interest 7 23 214.2% 22 30 40.3%
Depreciation 32 30 -5.0% 90 89 -0.9%
Profit before Tax 202 123 -38.9% 603 419 -30.6%
Tax 20 20 2.0% 54 45 -17.0%
Profit after Tax/(Loss) 182 103 -43.4% 549 374 -31.9%
Net profit margin (%) 5.4% 2.9%   6.0% 4.4%  
Diluted number of shares 31.9 31.9   31.9 31.9  
Diluted Earnings per share* 22.8 12.9   22.9 15.6  
P/E (x)   12.3     10.2  

At the current market price of Rs 158, the stock is trading at a P/E multiple of 10x its 9mFY02 annualised earnings. The stock price is likely to witness some selling pressure due to the decline in the bottomline. The company has been concentrating on improving the share of revenues from the services business. In FY01, the contribution from services was around 17%. Increased contribution could help the company improve its topline growth and inch its operating margin higher in the future. However, for FY02, the company will close the year with a decline a topline and operating margins.

Equitymaster requests your view! Post a comment on "HCL Infosystems: Margins under pressure". Click here!


More Views on News

HCL INFOSYS 2018-19 Annual Report Analysis (Annual Result Update)

Sep 24, 2019 | Updated on Sep 24, 2019

Here's an analysis of the annual report of HCL INFOSYS for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of HCL INFOSYS. Also includes updates on the valuation of HCL INFOSYS.

HCL INFOSYS Announces Quarterly Results (1QFY20); Net Profit Up 0.8% (Quarterly Result Update)

Aug 2, 2019 | Updated on Aug 2, 2019

For the quarter ended June 2019, HCL INFOSYS has posted a net profit of Rs 400 m (up 0.8% YoY). Sales on the other hand came in at Rs 7 bn (down 40.1% YoY). Read on for a complete analysis of HCL INFOSYS's quarterly results.

HCL INFOSYS Announces Quarterly Results (4QFY19); Net Profit Up 50.0% (Quarterly Result Update)

Jun 14, 2019 | Updated on Jun 14, 2019

For the quarter ended March 2019, HCL INFOSYS has posted a net profit of Rs 439 m (up 50.0% YoY). Sales on the other hand came in at Rs 10 bn (down 5.3% YoY). Read on for a complete analysis of HCL INFOSYS's quarterly results.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 30, 2020 (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