Stock in Focus

SENSEX (27512) BSE Sensex opened on a dull note and continued the weakness of last three trading session. It is making lower highs – lower lows and fell towards 27479 levels. Finally it ended the day at the 10 days low levels with the immense loss of around 355 points. Now till it doesn’t hold above 27800 zones weakness may continue in the market. On intraday basis if it manages to hold above 27550 zones then may witness a bounce back move towards 27750 -27800 zones while if it fails to hold 27500 then profit weakness may drag the index towards 27350 levels.

Stock in Focus

HCL Tech closed ~3% on higher than its 15-day average volumes in yesterday’s trade. We observe improvement in HCL Tech’s top account mining (top 5-20) and positive management commentary on deal pipeline. 

HCL Tech’s margins are expected to improve ahead as large engagement enter steady-state (offshoring lever) and with G&A optimization. For FY16E, Management has its target EBIT% band of 21% to 22%. 

We’ve factored EBIT margin improvement to 21.7%/22.1% for FY16E/17E, respectively as projects attain steady-state enabling higher offshore as well as on account of higher managed service growth. 

We expect US$ revenue/EPS to increase at 12%/11% CAGR over FY15-17E and we’ve factored EBIT% at 21.7%/22.1% for FY16E/17E. 

We recommend BUY in HCL Tech with Target Price of Rs.1,075.