HCL Technologies: A Dull Performance

Dec 28, 2017

HCL Technologies announced its second quarter results for FY18. The company reported a 2.3% QoQ increase in sales and a 0.2%% QoQ fall in net profits. Here is our analysis of the results.

Performance Summary

• Consolidated sales increased 2.3% QoQ in 2QFY18. In constant currency terms, sales were up 0.9% QoQ. In US$ terms, sales were up 2.3% QoQ.
• Operating profits were up 2.3% QoQ. The operating margin was flat sequentially at 21.9%.
• The other income was up 6.1% QoQ while depreciation & amortization increased 30.4% QoQ.
• The consolidated net profit decreased 0.2% QoQ.
• The company declared an interim dividend of Rs 2 per share.
  
  

  Consolidated Financials

  (Rs m)	1QFY18	2QFY18	Change	1HFY17	1HFY18	Change
  Sales	121,490	124,330	2.3%	228,560	245,820	7.6%
  Expenditure	94,910	97,140	2.3%	179,070	192,050	7.2%
  Operating profit (EBITDA)	26,580	27,190	2.3%	49,490	53,770	8.6%
  Operating profit margin (%)	21.9%	21.9%		21.7%	21.9%
  Other income (net of forex gain/loss)	3,130	3,320	6.1%	5,370	6,450	20.1%
  Finance costs	180	110	-38.9%	390	290	-25.6%
  Depreciation & Amortization	2,270	2,960	30.4%	3,590	5,230	45.7%
  Profit before tax	27,620	27,660	0.1%	51,660	55,280	7.0%
  Tax	5,520	5,720	3.6%	10,900	11,240	3.1%
  Minority interest & share of profit of assocIates	10	130		-50	140
  Profit after tax/(loss)	22,110	22,070	-0.2%	40,710	44,180	8.5%
  Net profit margin (%)	18.2%	17.8%		17.8%	18.0%
  No. of shares (m)					1,392.0
  Diluted earnings per share (TTM)					64.3
  P/E ratio (x)*					13.7

  *On trailing 12 month basis

  
  

  Segmental Performance

  (Rs m)	1QFY18	2QFY18	Change
  Revenue by service offerings
  Application Services	44,101	44,634	1.2%
  Engineering and R&D services	26,120	27,353	4.7%
  Infrastructure Management Services	46,895	47,867	2.1%
  BPO	4,374	4,476	2.3%
  Revenue by geography
  Americas	76,296	77,582	1.7%
  Europe	33,288	36,180	8.7%
  RoW	11,906	10,568	-11.2%
  Revenue by industry vertical
  Financial services	30,251	31,083	2.7%
  Manufacturing	42,400	44,137	4.1%
  Telecom, Media & Entertainment	9,476	9,822	3.6%
  Retail & CPG	11,542	11,563	0.2%
  Healthcare	14,336	14,547	1.5%
  Public Services	13,485	13,179	-2.3%