HCL Tech shares rise ahead of Q2 results; IT firm may retain FY25 guidance; key expectations

HCL Technologies Ltd (HCL Tech) is likely to post up to 14 per cent year-on-year (YoY) rise in net profit for the September quarter on a single digit growth in sales. Margin is seen improving sequentially. All eyes would be on the management commentary on FY25 guidance, new deal ramp up and visibility going ahead. Analysts largely expect HCL Tech to retain its guidance for the full year.

"HCL Tech is likely to maintain its 3-5 per cent guidance despite State Street’s dent in Q2 amid high growth expectations in Q3," said HDFC Institutional Equities.

Ahead of the quarterly results, shares of HCL Tech were trading 0.89 per cent higher at Rs 1,855.90 on BSE. The stock is up 25.21 per cent in 2024 so far against a 13.41 per cent rise in the BSE Sensex during the same period.

Axis Securities expects HCL Technologies to report a 14 per cent YoY rise in profit at Rs 4,055 crore for the September quarter against Rs 3,534 crore in the same quarter last year. Revenue is seen rising 9.2 per cent YoY to Rs 28,710 crore from Rs 26,290 crore YoY. Ebit margin may come in at 17.6 per cent, up 51 basis points QoQ but down 829 basis points YoY.

"We expect revenue to grow by 2.3 per cent QoQ, aided by the ramp-up in the previous deals and stronger IT Product & Platform business. Operating margins may expand due to lower onsite expenses. We expect normal deal wins in the quarter," the brokerage said.

Nuvama sees Q2 profit for HCL Tech at Rs 4,078.40. It sees sales rising to Rs 28,786 crore. Ebit margin is seen at 17.8 per cent. "Revenue shall grow at 1.3 per cent QoQ in CC terms and 1.9 per cent QoQ in dollar terms, driven by IT Services (2 per cent QoQ), ERD (1.2 per cent QoQ) and P&P (2 per cent QoQ). We anticipate HCL Tech to maintain FY25 revenue growth (3-5 per cent CC YoY growth in Services) and margin (18-19 per cent) guidance.

Emkay Global is building in 1.4 per cent QoQ dollar revenue growth after factoring in 70 basis points cross currency tailwinds, impacted by the State Street divestment. It expects EBIT margins to expand 90 bps sequentially.

The FY25 outlook, the likely impact of furlough in Q3 and possibility of demand uptick in H2 will be keenly followed. Deal wins, deal pipeline and pace of deal closures; growth outlook for ER&D and Software businesses, updates on certain CTG assets acquisition deal with HPE and its financial impact and demand outlook for major verticals like BFSI, Manufacturing, Technology, Communications, Retail, and Healthcare will also be on investor radar.