HCL Technologies hits record high; time to exit?

HCL Technologies is trading higher by over 3% at Rs 1,378, also its record high on BSE, after reporting a better-than-expected 5.7% quarter-on-quarter (q-o-q) growth in its consolidated net profit at Rs 1,496 crore for the second quarter ended December 2013 (Q2).  Revenues on a consolidated basis grew 2.8% at Rs 8,184 crore sequentially.

Analysts on an average had expected revenues of Rs 8,143 crore and profit of Rs 1,419 crore from the country’s fourth largest IT services firm. The company in a statement said that return of equity reached an all time high of 35%. It also announced a dividend of Rs 4 per share.

The stock opened at Rs 1,350 and touched a low of Rs 1,342 so far on the BSE. A combined around 800,000 shares changed hands on the counter in early morning deals on the BSE and NSE.

Stock strategy

Given the strong set of numbers and the road ahead for the information technology (IT) sector, analysts suggest that investors can hold on to the stock for now.

“HCL Technologies has a strong position in one of the fastest growing service vertical of IMS (infrastructure management services) and on the back of this the company has been growing largely at par with its peers. The concern of weak growth in core software services have been shrugged off by the company in the current set of results and management indicated that the deal pipeline in this area of services continues to remains healthy,” said Ankita Somani, research analyst – IT with Angel Broking.

“Overall, the company performed exceptionally well on the margins front and we continue to remain positive on the stock for a longer-term perspective keeping in notice the company’s deal signing trajectory and healthy operating performance since last several quarters. We maintain our Accumulate rating on the stock,” she adds.