HCL Tech Q3 earnings preview: Here’s what to watch out for

HCL Technologies is expected to post 2.7%-3.4% revenue growth in the said quarter.

Jefferies expects 3QFY23 revenue growth at 3.4% (QoQ cc) at $3,185 million driven by 25% QoQcc growth in products segment, but a lower 1% (QoQ c)c growth in the Services segment due to seasonal weakness.

“We expect 3QFY23 revenue growth of 3.4% QoQcc, driven by 25% QoQcc growth in products segment, but a lower 1% QoQcc growth in the Services segment due to seasonal weakness. Despite partial wage hikes, we expect a 85bps margin expansion, driven by pyramiding and margining expansion in products business. Expect HCLT to reiterate its 13.5-14.5% YoYcc growth guidance and 18-19% margin guidance,” Jefferies said in its note.

Also read: Infosys Q3 earnings preview

Whereas, BNPParibas expects 2.7% QoQ USD revenue growth (2.6% QoQ in CC) on license renewals and robust deal wins.

“We model a 69bp qq expansion in EBIT margin to 18.6% on higher contribution from the high-margin Products and Platforms segment, easing of supply-side challenges and aggressive fresher hiring. We expect HCLT to maintain its FY23 guidance of 13.5-14.5% CC revenue growth and EBIT margin of 18-19%,” said BNP Paribas in its note.

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“Look out for: FY23 revenue and margin outlook; risk of macro headwinds to demand and demand outlook; outlook on Services and products and Platforms segments; large deal wins and pipeline,” the brokerage added in a report.

While, Axis Securities expects HCL Tech to report revenue growth of 3.4% QoQ in rupee terms. The revenue is likely to grow 3.4% QoQ to ₹25,518 crore.

“However, it is likely to post an operating margin expansion of only 30bps,” it said.

What to watch out for

a) Deal TCVs and pipeline

b) Pricing scenario

c) Attrition, and

d) Outlook on growth/margins/DSO day.

HCL Tech is leading growth among large peers on seasonality said brokerage Anand Rathi.

“HCLT to lead growth among large peers on seasonality Product seasonality likely to benefit HCLT in Q3 (sequential growth). Y/Y growth to match TCS’,” said Anand Rathi in his report.

HCL Tech reported a 6% year-on-year (YoY) jump in consolidated net profit at ₹3,489 crore for the second quarter ended September 30, 2022. The company reported a profit of ₹3,259 crore in the same period last year (Q2FY22).

Tata Consultancy Services (TCS) on January 9 reported a lower-than-expected 11% increase in fiscal third-quarter profit as customers tightened spending amid mounting concern about a worldwide economic recession.

Net profit rose to ₹10,846 crore in the quarter ended 31 December from ₹9,769 crore a year earlier, the company said in a statement.

On Wednesday, HCL Tech shares ended 0.59 per cent lower at ₹1,058.80 at BSE.