(Rs m) | 4QFY03 | 4QFY04 | Change | FY03 | FY04 | Change |
Sales | 8,826 | 12,960 | 46.8% | 26,187 | 43,077 | 64.5% |
Other income | 82 | 8 | -90.5% | 172 | 232 | 35.2% |
Expenditure | 8,442 | 12,350 | 46.3% | 24,921 | 40,982 | 64.4% |
Operating profit (EBDIT) | 384 | 609 | 58.8% | 1,266 | 2,094 | 65.4% |
Operating profit margin (%) | 4.3% | 4.7% | 4.8% | 4.9% | ||
Interest | 15 | 6 | -59.7% | 66 | 31 | -53.1% |
Depreciation | 43 | 52 | 20.6% | 186 | 180 | -2.9% |
Profit before tax | 408 | 559 | 37.1% | 1,186 | 2,115 | 78.3% |
Tax | 66 | 101 | 53.6% | (144) | 364 | |
Extraordinary items | - | - | (404) | - | ||
Profit after tax/(loss) | 342 | 459 | 34.0% | 926 | 1,751 | 89.0% |
Net profit margin (%) | 3.9% | 3.5% | 3.5% | 4.1% | ||
No. of shares | 32.6 | 32.6 | 32.6 | 32.6 | ||
Diluted earnings per share* (Rs) | 41.9 | 56.2 | 28.4 | 53.7 | ||
P/E ratio (x) | 10.7 | 11.2 | ||||
(* annualised) |
Sales: Office automation & telecommunication (66% of consolidated revenues) business continues to drive topline growth for HCL Infosys. In FY04, revenues from this business grew by 89% YoY. The company has benefited tremendously from the rapid growth in Nokia handsets of which it is the largest distributor in the country. High growth in GSM mobile telephony and reducing prices of handsets has aided this fast growth in FY04. The computer systems business and Internet and related services business of the company also displayed increased strength and revenues from these grew YoY by 39% and 38% respectively.
Operating margins: Margins have improved for both 4QFY04 and FY04 on account of cost control measures adopted by the company and reduction in excise duties on computer systems and related products (from 7.8% in FY03 to 6.9% in FY04). As a matter of fact, the previous government had halved the excise duty on computers to 8% and also abolished the special additional duty of 4%. It also reduced custom duties on mobile handsets from 10% to 5% in the earlier part of 2004. Apart from helping HCL Infosys in maintaining margins, this move is likely to help the company in warding of some pressure posed from the low priced products from the unorganised segment (private assemblers).
Net profits: Apart from the strong growth in topline and improvement in operating margins, reduced interest and depreciation outgo has helped HCL Infosys to post robust earnings growth in FY04.
Growth is likely to continue for HCL Infosys as income levels rise and consequently the demand for desktop PCs. Larger investments from corporates to upgrade their hardware systems also promises strong times ahead. However, this growth will be highly dependent on how the company is able to modify its product offerings in times of rapidly changing technology. Also, the company continues to face tough competition from global players like IBM, Dell and HP and the unorganised segment that has cut into its market share over the past few years. Considering these factors, we would advice investors to practice caution.