HCL Technologies' Q1FY14 revenue of $1,270 million was in line with our estimate, while Ebitda margin at 26.3% (24.2% estimate) expanded 320bps q-o-q, driven by currency benefits and higher utilisation.
While IMS continued to spur growth (up 8.7% q-o-q), core software (CS) grew a muted 0.9%. This quarter again saw deal wins in excess of $1 billion. HCLT expects the traction to continue in IMS and hinted at improvement in CS owing to the new deal wins being integrated deals with CS contribution.
We maintain our FY14/FY15 revenue growth assumption of 15% each. Robust margin and revision of $/R rate from R58/56 to R62/60 for FY14/15 lead to an upward revision of 22.2% and 26.0% in our FY14E and FY15E EPS, respectively. We maintain buy with revised target price of R1,359 (15x FY15E EPS).
IMS continued to be HCLT’s growth driver as it grew 8.7% q-o-q in Q1FY14, while CS grew just 0.9%. Ebitda margin, at 26.3%, surged 320bps q-o-q, driven by currency benefits. The company envisages wage hike impact of 120 bps in Q2FY14.
For fourth consecutive quarters, it has won deals in excess of $1 billion. Ramp up of deals and revision in $/R rate lead us to revise up our Ebitda margin estimates by 370bps and 270bps to 25.2% and23.4% for FY14 and FY15, respectively.