Strong Q4, but will HCL Technologies' stock re-rate?

Margin improvement is key to bridge the valuation gap with peers

Investors have very little to complain about HCL Technologies’ (HCL Tech’s) results for the March 2017 quarter (Q4). The company delivered yet another quarter of industry-leading revenue growth on the back of all-round performance by most of its segments and healthy contribution from recent acquisitions. In fact, its sequential constant currency revenue growth of 3.8 per cent is higher than other comparable peers such as Tata Consultancy Services (TCS), Infosys and Wipro. This metric grew between 0 and 1.7 per cent sequentially for these peers in Q4.

Importantly, HCL Tech expects its constant currency revenues to grow 10.5-12.5 per cent