Find HCL tech on much awaited inflection point and Divergence from peers will be accentuated from FY 23 onwards, given their future strategy ( Demand side) and foundational blocks are now in place
Highest QoQ revenue growth among peers, lead indicators of deal wins and hiring suggest brighter times ahead
P&P division overhang should alleviate which is also one reason of valuations discount, this division need to be seen differently from services both on revenue trend( more of YoY game) and margins trajectory ( higher end of 25%+ annual) than services. Also sunset products are pretty much out of way so no baggage, winners to drive clean performance going forward.
Smart move to seperate ER&D and calling out focus “Futuristic” elements - mgmt presentation had Vijay kumar - AR+VR+Metaverse, silicon platforms-Semiconductors (hw and sw),industry 4.0 IoT, Med devices - remote mgmt and so on - listen Mr Vijay Kumar 21:00 onwards
ER&D growth and margin profiles are higher than regular IT services
Between ER&D and P&P - 35% type revenues are high margins and relatively sticky relationships and higher growth ( key strategy difference)
Also in AR 21 - as part of Market growth strategy, focus is higher on Non US geo - results are visible as they are growing well in these geo
Mgmt was candid about FY21 and 22 being investment heavy and hence margins on lower end of guidance - already negotiating higher pricing ( and higher T&M projects share) and fresher ratio going high should normalize it back in few quarters, Attrition is hitting them alike industry, though they are better off than most( except TCS). Happy to see them chasing growth and right investments.
All in all good quarter and FY 23 onwards see them narrowing valuations gap with TCS and Infy.
Proud to see world dominance by Indian IT services put together, middle class at scale they have built in last 20 years to indirectly drive India consumption growth, they continue to be a strong pillar of society at large and quality of employment opportunities they continue to provide to next generation at volumes that India needs.
Invested in IT as basket, HCL being Highest allocation
Looks like they will probably do a buyback in coming 1-2 quarter at 1500-2000 to improve EPS and other metrics… so these key people are acquiring shares at current price to tender it later.
This shows they tend to do but mostly to just use their cash and increase their holdings and this shows that after buyback there was a decrease but still greater than post-acquisition of shares so just by looking at new contracts they can start to play out very soon that can be a reason for buying shares at a premium valuation.
Their new partnership and recent two acquisition can be very good that is right now not on the balance sheet till date.
ER&D leadership credentials testimony from Zinnov , out of top 50 firms.
ER&D is a high margin, high growth area and sticky biz, Players like Tata elxi etc command high valuation as core focus here. This is a high focus and near 20% revenue for HCL.
In the annual report-2021 (pg:211), independent auditors mentioned that there have been some delays in payment of duty of customs. Do such instances represent any shortcomings in the internal controls of a company? Or could they be just one-off occurrences due to genuine reasons? Thanks in advance
There can be many reasons of such delays, Including some regulatory related delays too. Best way is to directly writing to company and asking about the real reasons…
While the results are not great and along expected lines, the share of ERD segment is growing. The acquisition of Quest may help as well. Product segment continues to be flat.
HCL technologies in the final stages of acquiring Quest Informatics Pvt Ltd through all cash purchase (15 Cr.). This will enhance it’s capability in the Industrial IoT and aftermarket domains
Notification to the stock exchange can be accessed here
HCLTech, a leading global technology company, today
announced it has been named an Official Cornerstone Partner of MetLife Stadium and the official digital
transformation partner of the New York Giants, New York Jets and MetLife StadiumHCLTech, a leading global technology company, today
announced it has been named an Official Cornerstone Partner of MetLife Stadium and the official digital
transformation partner of the New York Giants, New York Jets and MetLife Stadium https://www.bseindia.com/xml-data/corpfiling/AttachLive/90dca201-a3b5-45b0-947c-db28b154a002.pdf
Reverse Dcf
I have used terminal multiple of 15 being conservative, Expected ROR 15 percent .
So co need to grow at 12.5 percent for next 10 years to meet investor’s expectations pf 15 percent
DCF model is agnostic to dividend policy. High dividends would imply lower reinvestment in the business, which (in theory at least) would lead to lower free cash flows in future years and so, lower PV. Thus, it all gets in-built into the intrinsic value of the business.
Moreover, in all DCF models, there is an assumption that intermediate cash flows are reinvested at the same rate of return at which discounting is done. This implies the shareholder will reinvest dividends at the same rate of return as what Retained Earnings would earn, and so there is no incremental benefit in getting high dividends (in theory).
