HCL Technologies Ltd is all set to report September quarter results on Thursday, along with IT major Infosys. The software export is expected to report a sequential growth in constant currency (CC) revenue after two quarters of decline. On year-on-year basis, profit for HCL Tech is seen rising 7-10 per cent on a similar growth in sales, analysts said. They expect deal wins to be in excess of $4 billion.
To recall, HCL Tech had a subdued show in the June quarter largely impacted by a decline in Engineering Research & Development (ER&D) revenues, which accounted for 15.4 per cent of the IT firm's total revenue. This was a result of project downsizing within the hi-tech and telecom sectors.
Also, HCL Tech had announced that the wage hike cycle would be skipped for mid-level and senior employees, whereas wage revision for junior level employees was deferred to the December quarter from the usual September quarter.
"The forthcoming results will reflect a contribution to revenue growth from the inorganic acquisition of ASAP as well as an anticipated expansion of EBIT margins by over 50 bps compared to June, owing to moderation in sub-contracting costs. Notably, a substantial uptick in net new deals is expected, largely propelled by the Verizon agreement, set to begin contributing from November 2023," said Dhruv Mudaraddi, Research Analyst at StoxBox.
Kotak Institutional Equities said net new deal wins could be at a historical high, aided by the Verizon deal. It said EBIT margin is likely to improve 60 basis points sequentially, primarily aided by operational efficiencies.
HCLT's guidance of 6-8 per cent will now include the ASAP acquisition, implying a 0.8 per cent cut in the organic revenue growth guidance. The EBIT margin guidance band of 18-19 per cent is also a stretch.
"We expect investor focus on recovery in demand for discretionary services, growth in apps in light of deteriorating discretionary spending; demand for IMS and factors that underpin management confidence to achieve growth and guidance," Kotak said.
The brokerage sees HCL Tech to report profit at Rs 3,492 crore, up 7.5 per cent YoY. It sees revenue growing 7.6 per cent YoY at Rs 24,685 crore. Ebit margin is seen at 18 per cent, up 60 basis points QoQ but down 41 basis points YoY.
Nirmal Bang sees profit for HCL Tech rising 9.9 per cent YoY to Rs 3,833 crore and sales growing 10.3 per cent YoY to Rs 27,231 crore. It sees Ebit margin at 17.9 per cent.
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