Reviews

In this edition, we have reviewed HCL Technologies Ltd. and Procter and Gamble Hygiene We suggest our reader-investors to HOLD in HCL Technologies Ltd. and Procter and Gamble Hygiene

HCL Technologies Limited is engaged in providing a range of software development services, business process outsourcing services and information technology (IT) infrastructure services.

We had previously recommended the scrip in Volume No. 34, Issue No. 21 dated September 16-29, 2019. The scrip was then trading at Rs1,085 and was recommended based on its robust financial performance along with its ability to acquire firms in order to accelerate inorganic growth.

On the consolidated financial front, the company posted net sales of Rs18,135 crore for Q3FY20, up by 15.52 per centfrom Rs15,699 crore in Q3FY19 driven mainly by growth in product and platform business. The PBDT was Rs4,628 crore, an increase of 24.71 per cent in Q3FY20 from Rs3,711 crore posted in Q3FY19. HCL Technologies gained a net profit of Rs2,944 crore in Q3FY20, rising 13.01 per cent from Rs2,605 crore gained in Q3FY19 owing to positive deal wins. On the annual front, the net sales came in at Rs60,427 crore in FY19, up by 19.49 per cent from Rs50,569 crore in FY18.

In FY19, the PBDT increased by 18.57 per cent to Rs14,695 crore from Rs12,394 crore in FY18. The company’s net profit gained in FY19 was Rs10,120 crore, up by 16.20 per cent from Rs8,709 crore gainedin FY18. HCL Technologies has posted strong broad-based growth across all its verticals. The increase in demand for its product and platform services, which is a high operating margin business, aids the company in attaining growth momentum along with healthy deal pipeline and revitalisation of key businesses.

Hence, we recommend a HOLD.

Procter and Gamble Hygiene and Healthcare Ltd. is engaged in the manufacturing, trading, marketing and selling of branded, packaged fast moving consumer goods in the feminine care and healthcare businesses. We had previously recommended the scrip in Volume No. 34, Issue No. 22 dated September 30-October 13, 2019. The scrip was then trading at Rs11,780.90 and was recommended based on the stock’s bullish nature.

Looking at the quarterly trends on a consolidated basis, for Q2CY20 the company posted net sales of Rs1,340.72 crore, which is a decline by 4.28 per cent compared to net sales of Rs1,400.7 crore for Q2CY19. For Q2CY20, the companygained an operating profit of Rs265.08 crore as against an operating profit of Rs274.62 crore in Q2CY19, exhibiting a decline of 3.47 per cent. The net profit of the company increased by 26.31 per cent to Rs140.95 crore in Q2CY20 as compared to Rs111.59 crore in Q2CY19.

Looking at the annual financial trend, for FY19 the net sales of the company increased by 20.01 per cent to Rs2,946.50 crore from Rs2,455.29 crore for FY18. The PBDT increased by 3.62 per cent and stood at Rs657.11 crore for FY19 as compared to Rs634.14 crore for FY18. The net profit increased by 11.89 per cent to Rs419.13 crore in FY19 from Rs374.59 crore in FY18. The company continues to focus on strengthening the brandfundamentals by engaging in strategic moves such as innovation, product launches, distribution expansion and better marketing strategies.

Thus, we recommend a HOLD