HCL Technologies: Good show

 

The stock of HCL Technologies (HCL) was up over 5 per cent last week, as markets cheered the better-than-expected financials delivered by the company.

In the December quarter, HCL’s revenues grew by 4.9 per cent Q-o-Q (5.6 per cent in constant currency) in dollar terms, the highest among top-tier IT players. The company’s operating margins were relatively stable at 19.6 per cent for the third quarter.

Geographically, all the regions reported double-digit growth on Y-o-Y basis, indicating broad-based traction. Client additions were also healthy for HCL. At 86.6 per cent, the company’s utilisation rate is among the highest in the industry. One point of concern for HCL is the rise in attrition, which is at 17.8 per cent currently.

 

The stock still trades at a discount to other peers. On a trailing basis, the price-earnings multiple for HCL is 16 times. Peers such as Wipro, Infosys and TCS trade at 17-21 times. If the consistent show from HCL continues, it may well bridge the gap in valuations soon.

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