HCL Technologies (HCL Tech) is all set to report its quarterly results on Thursday, after market hours. If one were to believe brokerage reports, HCL Tech would lead the tier I pack, with highest sequential revenue growth of 3.6 percent in constant currency terms.
Conference call
The senior management of the IT major will conduct an audio conference call at 7:30 pm. The one hour conference call would see the management discussing the results, which would be followed by a detailed question-answer session.
A replay of the conference call will be available one hour after the conclusion of the conference call until January 19, 2023.
Q3 results
Sharekhan expects HCL Tech to report 11.1 percent YoY rise in net profit at Rs 3,825 crore compared with Rs 3,442 crore in the corresponding quarter last year. It sees sales for the IT major rising 17.4 per cent YoY to Rs 26,214 crore compared with Rs 22,331 crore in the same quarter last year. Operating profit margin is seen at 22.7 percent against 24.2 percent in the year-ago quarter, down 149 basis points. Margin is seen improving 53 bps sequentially, as tailwinds of rupee depreciation and lower subcontracting expenses get partially offset by lower utilization due to higher furloughs.
“HCL Tech expected to report highest CC revenue growth of 3.6 per cent QoQ among Tier 1 IT companies under our coverage with a likely 10 bps cross currency tailwind to result in higher reported dollar revenue growth of 3.7 per cent QoQ,” Sharekhan said.
Investec said HCL Tech’s growth likely to be better than peers aided by the P&P biz. HCL Tech had earlier called out headwinds in the services business led by higher furloughs. However, Investec believes 20 percent QoQ growth in the P&P (products & platforms biz) could aid growth.
“Overall, we expect commentary to be relatively soft going forward,” it said.
ICICIdirect expects HCL Tech to report 2.5 percent QoQ revenue growth in IT services in CC terms. It is factoring in a 50 bps cross currency headwinds for IT services for the quarter.
“Hence, IT services are likely to grow 2 per cent for the quarter. In dollar terms, revenue is expected to grow 3.4 per cent QoQ, aided by the P&P business. Rupee revenue is expected to grow 6.1 per cent QoQ. On the margin front , we expect EBIT margins for the company to improve 30 bps QoQ to be aided by a rebound in P&P (high margin business), easing of supply side pressure and rupee depreciation.
Deal wins, hiring & attrition
Nirmal Bang is expecting deal wins to be flat in the December quarter in the range of $2-2.5 billion, which implies modest acceleration in growth in FY23 TCV vis-à-vis FY22. This is because HCL tech had hinted at a record pipeline with a good mix of large and mid-sized deals, Nirmal Bang said. The company believes that it will continue to win deals in North America while Europe may see some slowdown, Nirmal Bang noted.
“After below-average hiring in 1HFY23, we believe there will be some uptick in hiring for 3QFY23 as the company has left its guidance of hiring 30,000 freshers unchanged. Quarterly attrition (23.8 per cent in Q2FY23) is moderating and this trend is expected to continue in 3QFY23 as well,” Nirmal Bang said.
Revenue guidance
ICICIdirect said it does not expect the company to change FY23 revenue guidance of 13.5 per cent-14.5 per cent and FY23 EBIT margin guidance of 18-19 per cent, as revenue and EBIT margin are largely factored in the pain points.
“Due to marginal currency movements ie GBP and EUR depreciation against the US dollar, cross currency headwinds are expected to be in the range of 20-50 bps for the quarter, which is expected to impact dollar revenues. Rupee revenues for the quarter are expected to be aided by continued rupee depreciation against the dollar,” it said.
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