New Delhi: Shares in HCL Tech, India's fourth largest software services exporter, soared over 6 per cent in a weak market on the back of strong quarterly performance. The stock was the top gainer on the 50-share Nifty index and the BSE IT index, which also comprises of larger names like TCS, Infosys, and Wipro.
"The results were better than expectations. We were looking at 2 per cent growth in dollar revenues and they have done 3 per cent. The strong numbers were primarily driven by slightly better revenues and the benefit of a rupee deprecation which helped the company in a big way," Bhavin Shah, CEO of Equirus Securities told NDTV Profit.
Here are the top reasons for the outperformance in the stock.
1) Consolidated net profits jumped to Rs 854 crore significantly higher than estimates of Rs 711 crore.
2) HCL Tech also beat sales estimates in rupee terms, which rose 13.4 per cent sequentially to Rs 5,919 crore against estimates of Rs 5,883 crore.
3) Dollar revenues, the most important number for IT companies, at $1079.61 million were also higher than estimates of $1072 million.
4) Margins were the big beat. Earnings before interest, tax, depreciation and amortization (ebitda) margins, key measure of profitability, expanded by 360 basis points to 22 per cent against 18.4 per cent in the last quarter. Margins were significantly higher than estimates of 19.4 per cent.
5) Rewarding shareholders: HCL Tech said it will pay out a dividend of Rs 4 per share.
Over the last few quarters, HCL Tech has inched ahead of its bigger rivals like Infosys and Wipro on the back of strong earnings growth. Analysts say that trend is likely to continue.
However, the stock which is already trading near its life-time high may not see much upside.
"The growth momentum is slowing for all IT players. There will be further slowdown going forward which will limit the upside in the stock," Shah said.
"The results were better than expectations. We were looking at 2 per cent growth in dollar revenues and they have done 3 per cent. The strong numbers were primarily driven by slightly better revenues and the benefit of a rupee deprecation which helped the company in a big way," Bhavin Shah, CEO of Equirus Securities told NDTV Profit.
Here are the top reasons for the outperformance in the stock.
1) Consolidated net profits jumped to Rs 854 crore significantly higher than estimates of Rs 711 crore.
2) HCL Tech also beat sales estimates in rupee terms, which rose 13.4 per cent sequentially to Rs 5,919 crore against estimates of Rs 5,883 crore.
3) Dollar revenues, the most important number for IT companies, at $1079.61 million were also higher than estimates of $1072 million.
4) Margins were the big beat. Earnings before interest, tax, depreciation and amortization (ebitda) margins, key measure of profitability, expanded by 360 basis points to 22 per cent against 18.4 per cent in the last quarter. Margins were significantly higher than estimates of 19.4 per cent.
5) Rewarding shareholders: HCL Tech said it will pay out a dividend of Rs 4 per share.
Over the last few quarters, HCL Tech has inched ahead of its bigger rivals like Infosys and Wipro on the back of strong earnings growth. Analysts say that trend is likely to continue.
However, the stock which is already trading near its life-time high may not see much upside.
"The growth momentum is slowing for all IT players. There will be further slowdown going forward which will limit the upside in the stock," Shah said.
