X

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.
Software key to HCL Info’s fortunes - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 28, 2000

    Software key to HCL Info’s fortunes

    HCL Infosystems is primarily engaged in the computer hardware business that accounted for 85% of its total revenue in FY00. Apart from branded computers, it also deals in other products like printers, scanners, photocopiers, cellular phones and EPABX Systems.

    The company also offers software services for which it has achieved SEI CMM Level 4 during FY00. Surprisingly, growth in its software business witnessed a slow down during the year. While revenues from hardware business grew by 22%, software services business grew by a marginal 4%.

    HCL Infosystems is the undisputed leader in the branded personal computer (PC) market with a share of 12.9% in volume terms and 18.6% in value terms. Due to extensive competition and price wars coupled with cheaper imports, operating margins in the hardware business have remained poor. However, in the last three years the company has maintained its profit margins in range of 4-5% in the hardware business.

    The demand for branded PCs is expected to improve in future with more and more industries getting IT enabled. Also, the reduction in the excise duty has narrowed down the difference between branded and non-branded PCs and other related products. IDC estimates the Indian PC market to grow at a compounded annual growth rate (CAGR) of 38.7% in the next three years. HCL with its unique brand identity is likely to benefit with increasing demand for computers.

    Financial Performance
    Year ended June 30 FY97 FY98 FY99 FY00 4 yrs CAGR
    Net Sales 5,924 6,559 8,934 10,654 21.6%
    Total revenues 5,977 6,614 8,974 10,766 21.7%
    Operating profits 360 377 816 850 33.2%
    Depreciation 38 80 115 127 50.1%
    Interest 322 89 96 52 -45.6%
    Profit before tax 53 263 645 784 146.0%
    Tax 2 2 60 54 229.2%
    Profit after tax 51 262 349 731 142.6%

    Key Ratios
    Particulars FY97 FY98 FY99 FY00
    Gross profit margin 6.1% 5.8% 9.1% 8.0%
    Effective tax rate 2.8% 0.6% 9.3% 6.8%
    Net profit margin 0.9% 4.0% 3.9% 6.9%
    EPS (Rs) 1.6 8.2 11.0 22.9

    The company is gradually moving towards providing software services in the areas of consulting, system integration, ERP implementation and software development in order to improve its bottomline growth. However, services provided by HCL are at the lower end of the value chain.

    During the year, its wholly owned subsidiary HCL Infinet has started providing ISP services in 14 cities. It plans to extend this service to 42 cities by the year-end. The company plans to achieve a subscriber base of 100,000 within a year of launch. This will make it one of the largest ISPs in India. In the near future HCL Infinet plans to provide B2B and ASP (application service provider) services. This could go a long way in improving the business of the company.

    We have projected an EPS growth of 23% for the year ended June 2001 on revenues of Rs 13 bn. HCL’s future profits growth would be driven by increasing contribution from software services business. This is expected to maintain its topline growth in the range of 25-30% in the next three years. At the current market price of Rs 242 the stock is trading at a P/E of 9 times its FY01 projected earnings.

    The company’s future valuations depends on its ability to successfully offer higher value added services in the software segment and maintain its leadership position in the hardware segment in the face of increasing competition from the unorganised sector apart from branded players such as Compaq and IBM.

     

     

    Equitymaster requests your view! Post a comment on "Software key to HCL Info’s fortunes ". 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...

    More
    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

    HCL INFOSYS SHARE PRICE


    Aug 16, 2017 (Close)

    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 - SMARTLINK NET COMPARISON

    Compare Company With Charts

    COMPARE HCL INFOSYS WITH

    MARKET STATS