- We expect HCLT’s USD revenue to grow 5.3% QoQ in 1QFY17 and 5% QoQ on a constant currency basis. Impact from cross currencies should add ~30bp to revenue growth.
- Organic growth of 2.5% QoQ CC, would be summed up by the following factors:  Ramp up in IMS deals,  Commencement of revenue from the Volvo deal,  Pressure of insourcing at a major client. The remainder would be contributed to by the external IT business of Volvo that HCLT acquired.
- Given the lower margin of the external IT business of Volvo and investments in visas, margins are expected to decline by 150bp QoQ to 20.7%.
- PAT estimate for the quarter is INR18.8b, -2% QoQ, on the back of lower margins.
- The stock trades at 13.7x FY17E and 12.4x FY18E EPS. Maintain Buy.
Key issues to watch for
- Commentary on margin expectations for FY17.
- TCV of deals signed during the quarter.
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- Organic growth in IMS and traction in Engineering.