HCL Technologies, which is expected to announce its second quarter (October-December' 14) earnings in the last week of January 2015, yesterday released its pre-earning forecast. The Company, through this pre-earnings brief, highlighted how the currency movements are likely to influence its 2QFY2015 results.
According to the company, since during the quarter, US Dollar continued to strengthen against almost all global currencies like British Pound, Euro, AUD and so on and the company’s revenues are derived in multiple currencies, the revenues for the quarter to be reported in US Dollar would have adverse impact of 210 bps on account of strengthening of US$ against various global currencies. The impact has been computed using the exchange rate as on December 18, 2014.In 1QFY2015, the Company posted 1.9 % QoQ growth in US Dollar terms, this was after taking into account the adverse impact of 130bps on account of movement in various currencies and had delivered constant currency growth was 3.2% QoQ.
At the beginning of the quarter, the company had estimated foreign exchange loss of USD 2.5 million on account of cash flow hedges based on exchange rates prevailing as on September 2014 end. However taking into account the exchange rate as on December 18, 2014, the company now expects to post foreign exchange gain of USD 2.0 million covering the impact of both cash flow hedges and mark-to-market of the foreign currency assets and liabilities. While the above is interim information, the actuals would vary depending upon the exchange rates during remaining period of quarter. For the quarter ended 30th September 2014, the company had reported treasury income of USD 33.4 million.The treasury income is likely to be lower by 5% in October-December' 14 quarter. Last quarter (July-September' 14), HCL Technologies had also recorded capital gains of USD 25.2 million on property sale. That being one off event would not be there in this quarter.The Company expects effective tax rate to be in the guided range of 21% to 22%.
Given, the currency fluctuations, we now expect the company to post a 2.2% USD QoQ sales growth during 2QFY2015. Consequently, we expect the USD yoy growth of 13.1% on sales during FY2015. Thus, now our FY2015 sales and EPS stands at Rs 365.28 billion V/s Rs 376.25 billion and Rs 96.8 V/s Rs 97.2 respectively.
''As of now we maintain our FY2016 numbers and our target on the stock of Rs 1968 and a buy recommendation,'' said Sarabjit Kour Nangra, VP research, IT, Angel Broking.
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