HCL Infosystems: Disappointing profit growth - 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: Disappointing profit growth

Aug 17, 2000

HCL Infosystems has reported a disappointing financial performance for FY00. The company's profits increased by 25% to Rs 731 m while sales have grown by 19% to Rs 11 bn. The company derives more than 80% of its revenues from computer hardware business where the margins are under pressure.

(Rs m)FY99FY00Change
Sales 9,460 11,249 18.9%
Other Income 40 113 180.5%
Expenditure 8,644 10,399 20.3%
Operating Profit (EBDIT) 815.9 850.0 4.2%
Operating Profit Margin (%)8.6%7.6% 
Interest 96 52 -46.0%
Depreciation 115 127 10.0%
Profit before Tax64578421.5%
Tax 60 54 -10.7%
Profit after Tax/(Loss) 585 731 24.8%
Net profit margin (%)6.2%6.5% 
No. of Shares (eoy) (m) 31.9 31.9  
Diluted number of shares 31.9 31.9  
Diluted Earnings per share* 18.34 22.90  

During the FY00, HCL's operating margins declined to 7.6% (from 8.6% in FY99) due to increasing competition in the personal computers (PC) market from assembled manufacturers and other branded producers. Its focus in the software services market is likely to improve the margins in the current year if the company manages to increase the revenues from this segment. In the software service segment the company is constantly building skills in e-commerce development tools and applications like CRM (customer relationship management), SCM (supply chain management) and knowledge management.

The domestic home PC market accounts for around 54% of total PC sales in India. The market is expected to grow at the rate of 65% as the Internet culture is spreading fast in India. HCL is the undisputed market leader with a share of around 12% in volume terms in the domestic branded PC market. To meet the increasing demand of PCs the company is planning to increase its production capacity to 250,000 from the current 150,000.

HCL has a wholly owned subsidiary called HCL Infinet which offers free Internet access with every PC sold by its parent company. This strategy is expected to provide customer base of over a lakh in the first year itself as the parent company has set a sales target over 150,000 PCs for the year 2001.

At the current market price of Rs 294, HCL Infosystems is trading at a P/E ratio of 13 times its FY00 earnings. Historically the company's P/E was in the range of 40-50 times. Its lower valuations are due to its focus into low margin hardware business and the low value added services provided in the software services business. This has resulted into bottomline growing at the slower rate compared to other software majors. The future valuations of the company will depend on its ability to show a relatively higher growth in profits, by increasing contribution from software services and providing value added services.

Equitymaster requests your view! Post a comment on "HCL Infosystems: Disappointing profit growth". Click here!


More Views on News

HCL INFOSYS 2020-21 Annual Report Analysis (Annual Result Update)

Nov 1, 2021 | Updated on Nov 1, 2021

Here's an analysis of the annual report of HCL INFOSYS for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of HCL INFOSYS. Also includes updates on the valuation of HCL INFOSYS.

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 3, 2021 (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