HCL Tech Q3: Analysts see up to 6% QoQ growth in profit; margins may expand

IT giant HCL Technologies is expected to report strong December quarter (Q3FY22) numbers on a sequential basis, thus reversing its trend of the previous three quarters, analysts believe. The company is scheduled to announce its Q3FY22 results on Thursday, January 14.

The median forecast of seven brokerages pegs growth in HCL Tech’s Q3 consolidated net profit at 3.4 per cent on a quarter-on-quarter (QoQ) basis, at around Rs 3,350-3,400 crore. This, analysts say, will be on the back of a solid 4.8 per cent jump in consolidated revenue, which is expected to be anywhere between Rs 21,500 and 22,000 crore.

Here’s a quick snapshot of brokerage expectations:

Jefferies

Jefferies foresees revenue growth of 3.8 per cent QoQ on constant currency (CC) basis, with 2.8 per cent QoQ CC in services and a strong 12 per cent QoQ CC in P&P (Products & Platforms) segment. The P&P segment could benefit from deal closures that got delayed in Q2. The brokerage firm expects a modest 10 basis points (bps) expansion in EBIT margins to 19.1 per cent.

Revenue in rupee terms stood at Rs 19,471 crore in Q3FY21 and Rs 20,895 crore in Q2FY22.

Sharekhan

The brokerage expects revenue growth of 4.4 per cent QoQ on CC basis, with cross-currency headwinds of 80 bps (3.6 per cent). EBIT margins are expected to expand by 62 bps led by higher offshoring and anticipated recovery in the product business. Net profit, meanwhile, is expected to grow by 4.3 per cent QoQ to Rs 3,405 crore.

The company had reported net profit of Rs 3,977 crore in Q3FY21 and Rs 3,263 crore in Q2FY22.

Motilal Oswal

The brokerage firm expects the IT firm to make a good sequential catch-up in Q3FY22, with around 3.6 per cent QoQ growth in net profit mid some impact from discontinuation of DXC technology on YoY basis.

Moreover, analysts at MOFSL expect HCL Tech’s margins to be impacted by 80-100 bps due to wage hike. However, revenue growth may be able to offset the same, they say.

ICICI Direct

The brokerage firm expects dollar revenue growth of 3 per cent QoQ and 3.5 per cent on CC basis for the IT firm.

EBIT margins are expected to improve by 20 bps QoQ, negating a likely 80-90 bps impact due to salary hikes. PAT is expected to improve 3 per cent QoQ.

HDFC Securities

The brokerage firm expects 2.6 per cent QoQ growth in Q3 net profit, backed by a solid 5.1 per cent jump in QoQ revenue on rupee terms. EBIT margins may rise by 10 bps in the quarter. The IT firm is also expected to maintain its double-digit guidance.

Nirmal Bang

After three successive quarters of poor sequential growth, the brokerage firm expects a 5 per cent QoQ growth in revenue on CC basis. They expect margin guidance to remain at the 19-21 per cent level. Going ahead, they expect a modest acceleration in growth for FY23 compared to FY22.

STOCK OVERVIEW

The stock so far since the start of 2022, has gained 2.5 per cent as of January 12, as against a 0.4 per cent rise in the BSE IT index and underperforming when compared to a 5 per cent rally in the S&P BSE Sensex. However, since its Q2 results, the stock was up 6.7 per cent, as against a mere 0.7 per cent gain for the Sensex, but lagged in terms of sector performance as the BSE IT index had surged 9.2 per cent in the same period.

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