Investor's Eye: Update - Wipro, HCL Technologies; MF - Sharekhan's top equity mutual fund picks, Sharekhan's top SIP fund picks

Investor's Eye [April 17, 2014]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE   Wipro Recommendation: Buy Price target: Rs650 Current market price: Rs586   Impressive margin performance continues   Result highlights For Q4FY2014, the company's IT services reported a 2.5% Q-o-Q growth in revenues to $1,720.2 million (the mid level of the guided range) on an organic basis. Excluding the numbers of the recent acquisition--Opus CMC, the revenues were up by around 2% QoQ. For Q1FY2015, Wipro's management has guided for a soft revenue growth of -0.3% to 2% QoQ. The order book however remains strong and the growth is expected to accelerate from Q2FY2015 onwards.  Wipro's IT services has delivered a third consecutive quarter of margins expansion. The EBIT margin improved by 150BPS QoQ to 24.5% (a 450-BPS improvement in the last three quarters), largely driven by its operational efficiency (utilisation improved by 220BPS QoQ; the net headcounts dropped by 349). The net income for the quarter was up by 10.5% QoQ to Rs2,226.5 crore.  Though the Q1FY2015 guidance appears soft, the management's confidence on the growth acceleration in FY2015 driven by strong deal wins and a positive margin outlook, gives comfort on the improving earnings predictability for FY2015E and FY2016E. We have broadly maintained our earnings estimates. The stock trades at 15.9x and 14.2x FY2015E and FY2016E earnings estimates. We retain our Buy rating on the stock with a price target of Rs650.       HCL Technologies Recommendation: Buy Price target: Rs1,700 Current market price: Rs1,424   Delivering on its commitments, retain Buy   Result highlights HCL Technologies has delivered another strong quarterly performance with a 100-BPS improvement in the EBIT margin to 24.7% (closer to Infosys' margin of 25.5%). The revenues grew by 3% QoQ to $1,361 million, with the growth remaining broad-based. The IT services business grew by 2% QoQ and the IMS business grew by 5.2% QoQ. The other income rose by 21.5% QoQ and the forex losses fell by 10% QoQ. The net income for the quarter increased by 8.6% QoQ to Rs1,624 crore.  The deal wins remained strong as the company signed 12 transformational deals with the total contract value (TCV) of the deals signed in the quarter reaching $1 billion (cumulative TCV of $4 billion in the last four quarters). The top five clients grew by 4.4% QoQ, one client added in the $100-million category and added four clients and three clients each in the $50-million and $30-million revenue categories respectively.  The company has delivered on its commitments of a broad-based revenue growth and a continual improvement in the margin (up 520BPS YoY, the highest among the top four IT companies). We maintain our positive stance on the company, given its strong earnings predictability and reasonable valuation. At the current level, the stock trades at of 12.5x FY2016E earnings. We maintain our Buy rating on the stock with a price target of Rs1,700.      MUTUAL GAINS   Sharekhan's top equity mutual fund picks Large-cap funds Mid-cap funds Multi-cap funds SBI Magnum Bluechip Fund Mirae Asset Emerging Bluechip Fund SBI Magnum Global Fund 94 Birla Sun Life Frontline Equity Fund - Plan A SBI Magnum Midcap Fund Tata Ethical Fund - Plan A Tata Pure Equity Fund - Plan A Axis Midcap Fund Tata Mid Cap Growth Fund - Plan A Reliance Focused Large Cap Fund Franklin India Prima Fund Principal Growth Fund UTI Wealth Builder Fund - Series II UTI Mid Cap Fund Tata Equity Opportunities Fund - Plan A Indices Indices Indices BSE Sensex BSE MID CAP BSE 500 Tax-saving funds Thematic funds Balanced funds Reliance Tax Saver (ELSS) Fund ICICI Prudential Exports and Other Services Fund ICICI Prudential Balanced - Growth ICICI Prudential Taxplan Reliance Media & Entet Fund HDFC Balanced Fund - Growth Principal Tax Savings Fund Franklin Build India Fund Tata Balanced Fund - Plan A - Growth Tata Tax Saving Fund - Plan A L&T India Special Situations Fund SBI Magnum Balanced Fund - Growth HDFC Taxsaver PineBridge Infrastructure and Economic Reform Fund - Std Canara Robeco Balance - Growth Indices Indices Indices CNX500 S&P Nifty (CNX Nifty) Crisil Balanced Fund Index Fund focus L&T India Special Situations Fund   Sharekhan's top SIP fund picks  Large-cap funds Multi-cap funds Birla Sun Life Frontline Equity Fund - Plan A SBI Magnum Global Fund 94 Reliance Focused Large Cap Fund Principal Growth Fund SBI Magnum Bluechip Fund Tata Ethical Fund - Plan A Tata Pure Equity Fund - Plan A Tata Mid Cap Growth Fund - Plan A UTI Wealth Builder Fund - Series II Tata Equity Opportunities Fund - Plan A BSE Sensex BSE 500 Mid-cap funds Tax saving funds SBI Magnum Midcap Fund Principal Tax Savings Fund UTI Mid Cap Fund Reliance Tax Saver (ELSS) Fund - Growth Franklin India Prima Fund ICICI Prudential Taxplan - Growth ICICI Prudential MidCap Fund HDFC Taxsaver - Growth Reliance Long Term Equity Fund Tata Tax Saving Fund - Plan A BSE Midcap CNX Nifty  Fund focus Tata Pure Equity Fund -Plan A   Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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