HCL Technologies (HCLT IN) : Management Meet Update
HCL Technologies (HCLT IN) : Management Meet Update
HCL Technologies (HCLT IN) : Management Meet Update
Macro concern persists, but not seen in deal pipeline: HCLT has seen no
incremental headwinds in the demand environment beyond what was already
communicated on Q1FY20 call about one client in BFSI vertical in Europe &
other in manufacturing vertical. Pipeline has infact improved on an aggregate
basis, including in BFSI, with no impact yet of the macro on decision making
cycles or revenue conversion of deals.
The present value of this purchase consideration stands at US$1,736 mn. Five
of the seven products that were acquired by HCLT were part of the earlier IPR
agreement. Unamortized present value of IPR stood at US$427 mn. The
purchase price comprising price paid, fair value of earn-out, remaining
consideration and unamortized value of IPR stood at US$2.162 bn.
9.00%
8.00%
7.00% 6.50% 6.50%
6.00% 5.20%
5.00%
4.00%
FY16 FY17 FY18 FY19 FY20E
Source: Company, PL
7.7%
10.00%
5.8%
8.00%
3.86%
3.50%
3.50%
3.30%
3.8%
3.25%
2.80%
6.00%
3.2%
3.1%
3.1%
2.9%
2.00%
2.00%
1.70%
1.70%
1.63%
1.60%
1.59%
1.40%
1.6%
1.5%
0.90%
4.00% 1.3%
0.67%
1.2%
1.0%
0.6%
0.3%
0.3%
2.00%
0.00%
-0.2%
-0.2%
-0.40%
-2.00%
-0.9%
-2.00%
-4.00%
2Q17
4Q17
2Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
3Q17
1Q18
3Q18
Source: Company, PL
P/E Mean Mean + Std Dev Mean - Std Dev QoQ $ Rev. Gr.
22.00 7%
20.00 6%
5%
18.00
14.73 4%
16.00
13.63 3%
14.00
2%
12.00 1%
10.00 11.77 0%
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Feb-16
Feb-17
Feb-18
Feb-19
Oct-15
Oct-17
Oct-18
Apr-16
Oct-16
Apr-17
Apr-19
Apr-15
Apr-18
Dec-15
Dec-17
Dec-18
Dec-16
Aug-15
Aug-17
Aug-18
Aug-16
Aug-19
Source: Company, PL
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
1Q17
3Q17
4Q17
2Q18
3Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q17
1Q18
4Q18
Source: Company, PL
26.5%
26.0%
26.0%
25.7%
25.6%
29.0%
25.4%
25.2%
25.1%
25.1%
25.1%
25.0%
24.2%
27.0%
23.4%
25.0%
25.1%
24.9%
24.7%
24.6%
23.0%
24.3%
24.2%
20.6% 24.1%
24.1%
20.0% 23.7%
23.7%
19.7%22.6%
21.0%
4Q19 19.0%21.4%
17.1% 20.5%
19.0%
20.4%
20.1%
20.1%
20.0%
19.7%
19.7%
19.6%
19.6%
17.0%
15.0%
1Q17
2Q17
3Q17
4Q17
4Q18
1Q19
2Q19
3Q19
1Q20
1Q18
2Q18
3Q18
Source: Company, PL
2Q17
3Q17
4Q17
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
1Q18
2Q18
3Q18
Source: Company, PL
Attrition
20.0%
18.6%
17.8% 17.9% 17.8%17.7%
18.0% 17.3%
16.9% 17.1%
16.2% 16.3%
15.7% 15.5%
16.0% 15.2%
14.0%
1Q17
2Q17
3Q17
4Q17
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
1Q18
2Q18
3Q18
Source: Company, PL
20.4%
20.1%
20.1%
20.0%
20.0%
19.7%
19.7%
19.7%
19.6%
19.6%
19.0%
13.0% 25.0%
17.1%
12.5% 20.0%
12.0% 15.0%
11.5% 10.0%
12.1%
11.8%
11.7%
11.8%
11.8%
11.2%
12.0%
11.1%
12.1%
12.3%
12.8%
11.6%
11.9%
11.0% 5.0%
10.5% 0.0%
1Q17
2Q17
4Q17
1Q18
2Q18
3Q18
1Q19
2Q19
3Q19
4Q19
3Q17
4Q18
1Q20
Source: Company, PL
2Q17
3Q17
4Q17
1Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q18
3Q18
4Q18
Source: Company, PL
USD
407 409
363
400 307 297 290
278 258
300
157
200 109
100
0
Q3FY17
Q4FY17
Q1FY18
Q3FY18
Q4FY18
Q1FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY17
Q2FY18
Q2FY19
Source: Company, PL
25
20 17 17 17
15 12
10
0
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20
Source: Company, PL
Engineering & R&D Services (% of total revenues) 17% 16% 16% 15% 16% 16% 16% 16% 16% 16%
Engineering & R&D Services (US$ m) 399 401 402 404 1606 427 433 435 444 1739
QoQ Growth (%) 5.6% 0.3% 0.4% 0.5% 5.6% 1.5% 0.5% 2.0% 8.3%
Engineering & R&D Services (Rs m) 27,762 28,246 28,359 28,486 112,852 30,295 30,749 30,903 31,521 123,468
Source: Company, PL
Source: Company, PL
HCLT trading at ~41% discount to TCS HCLT trading at ~37% discount to Infosys
May-16
May-16
Jan-18
Jun-18
Jan-18
Jun-18
Mar-17
Mar-17
Feb-15
Feb-15
Apr-14
Oct-16
Apr-19
Jul-15
Jul-15
Apr-14
Oct-16
Apr-19
Dec-15
Nov-18
Dec-15
Nov-18
Sep-14
Aug-17
Sep-19
Sep-14
Aug-17
Sep-19
Source: Company, PL Source: Company, PL
Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY18 FY19 FY20E FY21E Y/e Mar FY18 FY19 FY20E FY21E
(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
1200
1 08-Aug-19 BUY 1,210 1,023
Sep - 17
Sep - 18
Sep - 19
Mar - 17
Mar - 18
Mar - 19
7 07-Jan-19 Accumulate 1,100 942
8 08-Dec-18 Accumulate 1,100 962
9 23-Oct-18 BUY 1,255 952
10 05-Oct-18 BUY 1,255 1,077
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