HCL TECHNOLOGIES 2019-20 Annual Report Analysis

Tue, 31 Mar

HCL TECHNOLOGIES has announced its results for the year ended March 2020. Let us have a look at the detailed performance review of the company during FY19-20.

HCL TECHNOLOGIES Income Statement Analysis

• Operating income during the year rose 17.0% on a year-on-year (YoY) basis.
• The company's operating profit increased by 24.2% YoY during the fiscal. Operating profit margins witnessed a fall and down at 24.5% in FY20 as against 23.0% in FY19.
• Depreciation charges increased by 65.0% and finance costs increased by 190.2% YoY, respectively.
• Other income declined by 35.0% YoY.
• Net profit for the year grew by 9.3% YoY.
• Net profit margins during the year declined from 16.7% in FY19 to 15.6% in FY20.

HCL TECHNOLOGIES Income Statement 2019-20

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Net Sales	Rs m	604,270	706,760	17.0%
Other income	Rs m	9,530	6,190	-35.0%
Total Revenues	Rs m	613,800	712,950	16.2%
Gross profit	Rs m	139,160	172,860	24.2%
Depreciation	Rs m	20,730	34,200	65.0%
Interest	Rs m	1,740	5,050	190.2%
Profit before tax	Rs m	126,220	139,800	10.8%
Tax	Rs m	25,020	29,230	16.8%
Profit after tax	Rs m	101,200	110,570	9.3%
Gross profit margin	%	23.0	24.5
Effective tax rate	%	19.8	20.9
Net profit margin	%	16.7	15.6

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HCL TECHNOLOGIES Balance Sheet Analysis

• The company's current liabilities during FY20 stood at Rs 237 billion as compared to Rs 123 billion in FY19, thereby witnessing an increase of 92.9%.
• Long-term debt down at Rs 28 billion as compared to Rs 30 billion during FY19, a fall of 4.3%.
• Current assets rose 29% and stood at Rs 384 billion, while fixed assets rose 60% and stood at Rs 422 billion in FY20.
• Overall, the total assets and liabilities for FY20 stood at Rs 806 billion as against Rs 561 billion during FY19, thereby witnessing a growth of 44%.

HCL TECHNOLOGIES Balance Sheet as on March 2020

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*	% Change
Networth	Rs m	413,610	512,670	24.0
Current Liabilities	Rs m	122,990	237,300	92.9
Long-term Debt	Rs m	29,770	28,480	-4.3
Total Liabilities	Rs m	561,200	805,890	43.6
Current assets	Rs m	297,220	384,200	29.3
Fixed Assets	Rs m	263,980	421,690	59.7
Total Assets	Rs m	561,200	805,890	43.6

HCL TECHNOLOGIES Cash Flow Statement Analysis

• HCL TECHNOLOGIES's cash flow from operating activities (CFO) during FY20 stood at Rs 134 billion, an improvement of 48.9% on a YoY basis.
• Cash flow from investing activities (CFI) during FY20 stood at Rs -124 billion, an improvement of 302.7% on a YoY basis.
• Cash flow from financial activities (CFF) during FY20 stood at Rs -32 billion on a YoY basis.
• Overall, net cash flows for the company during FY20 stood at Rs -21 billion from the Rs 42 billion net cash flows seen during FY19.

HCL TECHNOLOGIES Cash Flow Statement 2019-20

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-19	Mar-20
Cash Flow from Operating Activities	Rs m	89,710	133,590	48.9%
Cash Flow from Investing Activities	Rs m	-30,730	-123,740	-
Cash Flow from Financing Activities	Rs m	-14,710	-31,680	-
Net Cash Flow	Rs m	42,440	-21,410	-

Current Valuations for HCL TECHNOLOGIES

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 40.7, an decline from the EPS of Rs 74.6 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 436.8, stands at 10.7 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 2.3 times, while the price to sales ratio stands at 1.7 times.
• The company's price to cash flow (P/CF) ratio stood at 14.7 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Sales per share (Unadj.)	Rs	445.5	260.4
TTM Earnings per share	Rs	74.6	40.7
Diluted earnings per share	Rs	37.3	40.7
Price to Cash Flow	x	24.2	14.7
TTM P/E ratio	x	29.2	10.7
Price / Book Value ratio	x	3.3	4.1
Market Cap	Rs m	1,359,331	2,124,121
Dividends per share (Unadj.)	Rs	8.0	10.0

Ratio Analysis for HCL TECHNOLOGIES

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.6x during FY20, from 2.4x during FY19. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 28.7x during FY20, from 73.5x during FY19. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company declined and down at 21.6% during FY20, from 24.5% during FY20. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company declined and down at 26.8% during FY20, from 28.9% during FY19. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company declined and down at 14.3% during FY20, from 18.3% during FY19. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-19*	12 Mar-20*
Current ratio	x	2.4	1.6
Debtors’ Days	Days	7	7
Interest coverage	x	73.5	28.7
Debt to equity ratio	x	0.1	0.1
Return on assets	%	18.3	14.3
Return on equity	%	24.5	21.6
Return on capital employed	%	28.9	26.8

To see how HCL TECHNOLOGIES has performed over the last 5 years, please visit here.

HCL TECHNOLOGIES Share Price Performance

Over the last one year, HCL TECHNOLOGIES share price has moved down from Rs 1,088.0 to Rs 436.8, registering a loss of Rs 651.3 or around 59.9%.

Meanwhile, the S&P BSE IT Index is trading at Rs 12,842.7 (up 3.0%). Over the last one year it has moved down from 15,280.3 to 12,842.7, a loss of 2,438 points (down 16.0%).

Overall, the S&P BSE SENSEX is down 24.2% over the year.

(To know more, check out historical annual results for HCL TECHNOLOGIES and quarterly results for HCL TECHNOLOGIES)

Read: Latest Annual Report Analysis of HCL TECHNOLOGIES