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Showing posts with label HCL Technologies. Show all posts
Showing posts with label HCL Technologies. Show all posts

Monday, August 27, 2007

Buy HCL Technologies

At the current market price of Rs. 284, the stock trades at 17 times it's trailing 12 months EPS. The stock is currently available at a huge discount compared to other large cap IT shares such as Infosys, Wipro etc.

The company Jun'08 quarterly results were good compared to Tier 1 companies due to it's pro-active hedging strategy. The company has hedged around 85 percent of revenues which should partly mitigate the risk of rupee appreciation.

Based on Jun'08 EPS, the stock trades at 13 times it's FY08E earnings. Investment can be considered in this stock with a horizon of year to two. Based on it's FY08E earnings the stock has a target of Rs. 390.

The company has seen good increase in business from the Asia-Pacific and European region. This together now constitutes to around 30 percent of it's revenue and provides a better geographical spread of revenues.

Fundamentals:

1) Better geographical spread and pro-active hedging strategy against rupee appreciation.

2) Strong multi million dollar clients with repeat business.

3) The company has unique client profile in aerospace and automotive which contributes to 25 percent of it's revenue.

Risks:

1) Further rupee appreciation.

2) US economic slowdown and also MNC's like accenture and IBM offering services comparing to the billing rates of Indian companies.

3) Very high employee attrition.

Posted by Srivatsan 5 comments

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Fundamental Analysis

Fundamental Analysis is the cornerstone of Investing. In fact, some would say that you aren't really investing if you aren't performing fundamental analysis.

During fundamental analysis we look at a stock from three aspects

Company

At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition.

Industry

At the industry level, there might be an examination of supply and demand forces for the products offered.

Economy

Fundamental analysis might focus on economic data to assess the present and future growth of the economy.

To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient.