HCL Technologies hits eight-month low

In past three four trading sessions, the stock has declined 16% after the company issued a profit warning for the Sep'15 quarter.

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HCL Technologies has dipped nearly 4% to Rs 822, also its eight-low on the NSE, on concerns of lower earnings growth in recently July-September 2015 quarter (Q1). The stock is currently trading at its lowest level since January 30, 2015.

In past three four trading sessions, since September 30, the stock has declined 16% after the company issued a profit warning for the Sep’15 quarter. The CNX Nifty gained 3%, while IT index down less than 1% during the same period.

HCL Technologies forecasting tepid US$ revenue growth in Q1 due to negative forex impact of 80 basis points, a slowdown in the infrastructure management services (IMS) segment due to transition issues and client-specific issues in a public services application development and maintenance (ADM) project, which should lead to a provision of US$ 20 million.

The profit warning was a negative surprise and would weigh on HCL Technologies’s growth and margins over the near term. The company has disappointed on margins over the past two quarters, and this profit warning will continue to weigh on the stock, says Rumit Dugar and Saumya Shrivastava, analysts at Religare Institutional Research.

At 01:20 pm, the stock was down 3.4% at Rs 824 compared to 0.12% rise in the CNX Nifty. A combined 3.3 million shares changed hands on the counter on the NSE and BSE so far.
 

"We lower FY16F/17F USD revenue growth to 10%/13% (from 13%/14.5%), incorporating cross-currency moves, the revenue warning, and increased caution on demand in the sector given the macro deterioration. Our FY16F/17F EPS estimates are lower by 2%, partly offset by our revised USD/INR assumption of 65 (versus 63.5 earlier)," points out Ashwin Mehta, an analyst tracking the company at Nomura in a report.

"Following the 13% post-revenue-warning correction, valuation looks attractive at ~13.5x FY17F EPS of Rs 63.9 (~25-30% discount to Infosys/TCS). HCL Technoligies and Cognizant Technologies remain our top buys," he adds.