HCL Infosys : Steady performance - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

HCL Infosys : Steady performance

Aug 21, 2001

HCL Infosystems has posted at topline growth of 3% for FY01. The net profits for the year declined by 20% compared to FY00. This was due to a 45% drop in other income and extra ordinary losses of Rs 106 m. The operating margins too have declined by 40 basis points. The company advanced a loan of Rs 138 m to ‘OWN HCL TRUST’ for operating an employee stock option scheme, and the Trust had utilized this amount for acquiring the company’s shares. As at 30th June 2001, due to significant decline in the stock prices (the stock was quoting Rs 850 in Feb 2000), the ability of the Trust to repay the loan has been impaired to the extent of difference between market price and purchase price. This amount of Rs 106 m has been written of in FY01, excluding which the decline in net profits would have been just 5.6%.

(Rs m)FY00FY01Change
Sales 11,249 11,623 3.3%
Other Income 113 61 -45.5%
Expenditure 10,399 10,784 3.7%
Operating Profit (EBDIT) 850 839 -1.3%
Operating Profit Margin (%)7.6%7.2% 
Interest 52 19  
Depreciation 127 122 -3.4%
Profit before Tax 784 759 -3.2%
Tax 54 69 29.0%
Provision and contingencies loss/(income) - 106  
Profit after Tax/(Loss) 731 584 -20.1%
Net profit margin (%)6.5%5.0% 
Diluted number of shares 32 32  
Diluted Earnings per share 23 18 -20.1%
P/E (x)  3.2  

The growth in the hardware business was a marginal 2%, while the services business grew by 36%. The growth in the hardware business could be low due to the fact that realisations have come down by 5.7% in the PC industry. The race to dominate the PC market has led to a price war amongst the players. Currently, the unoragnised sector hold 53% of the market share, MNC's have 27% and the Indian brands have just 20% of the market share. The change in market share compared to FY00 has been in favour of the MNC brands. The Indian brands have managed to gain market share marginally. However, the company's growth in the services segment too was below the industry growth rate of 55%. The lower growth rate could be due to services being concentrated in the Indian markets (the growth IT services sales in the country for FY01 was 30%).

(Rs m)FY00% of revenuesFY01% of revenuesChange
Sales Revenue 9,616 82.1% 9,794 77.4%2%
Service Revenue 2,092 17.9% 2,852 22.6%36%
Total revenues* 11,709   12,645  8%
* Consolidated revenues (HCL Infosys and Subsidiaries)

The companies margins have declined inspite of rise in contribution from its services business. This indicates that the margins in the services business too are under pressure. While the cost of sales and staff costs have increased, HCL Infosystems has managed to reduce its administrative costs by 8%.

(Rs m)FY00% of revenuesFY01% of revenuesChange
Cost of sales 8,538 75.9% 8,671 74.6%1.6%
Staff costs 800 7.1% 945 8.1%18.2%
Admin costs & Repair costs 1,094 9.7% 1,007 8.7%-7.9%
Voluntary retirement scheme 46 0.4% - 0.0% -

At the current market price of Rs 54, the stock is trading at P/E multiple of 3 times its FY01 earnings. The hardware companies command lower P/E multiples due to the fact their growth rates are lower than their software counterparts. As the result has nothing new to offer, the company's valuations might not see much of change and remain range bound.

Equitymaster requests your view! Post a comment on "HCL Infosys : Steady performance". 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'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

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.

More

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

HCL INFOSYS SHARE PRICE


Dec 6, 2021 03:36 PM

TRACK HCL INFOSYS

  • 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

HCL INFOSYS - TAI INDUSTRIES COMPARISON

COMPARE HCL INFOSYS WITH

MARKET STATS