HCLT Q3 Result Preview: IT major likely to outshine peers with 4.8% QoQ growth
Shiv Nadar-led IT major HCL Tech is all set to announce its third quarterly results for FY24 on January 12. The Q3 season for other IT companies will also kickstart next week with Infosys and Tata Consultancy Services to declare their results on Thursday.
The forward earnings outlook for the IT sector has seen a slight improvement with easing slowdown, however, December quarter is likely to remain a mixed bag.
Also read: Wipro Q3 Result Preview: 4 essential factors to watch out for in the earnings.
“We expect a weak quarter for IT Services companies as furloughs, weak discretionary spending and project cuts impact performance. Three of the big five IT services companies should report a yoy and qoq decline in revenues in the December 2023E quarter, while growth for the other two will trickle down to low-single digits,” Kotak Institutional Equities said in its report.
HCL Tech Q3FY24 expectations
Analysts predict that among tier 1 IT companies, HCL Tech is likely to outshine its peers with an estimated 4.8% QoQ CC growth.
“Among tier I, expect HCL Tech (HCLT IN) to outshine with an estimated 4.8% QoQ CC growth, led by both Services business (buoyed by Verizon deal) and favorable seasonality for its Products business,” Elara Capital said in a report.
Also read: Infosys Q3 results preview: Expect weak earnings with drop in revenue; margins to contract
During the second quarter of the fiscal year 2024, HCL Technologies disclosed a noteworthy 10% increase in its consolidated net profit, amounting to ₹3,832 crore, compared to ₹3,489 crore in the corresponding period of the previous year. Additionally, the company experienced an 8% surge in revenue from operations, reaching ₹26,672 crore, up from ₹24,686 crore during the same period last year.
For Q3 FY24, the company is likely to report a 6.3% growth in net profit reaching ₹4,063 crore, driven by robust revenue expansion. HCL Technologies is poised for a 5.47% sequential uptick in earnings before interest and taxes (EBIT) to ₹5,204 crore, with an expected improvement of 13 basis points in the EBIT margin.
“December is a seasonally strong quarter for the company. We expect 4.3 percent QoQ growth led by $50 million incremental revenues from Verizon contract, contribution of 1.5 percent to growth; $30 million incremental revenues from ASAP acquisition, driving 1 percent incremental contribution; and $70 million incremental revenues from products business (2.3 percent contribution) from seasonal strength in products,” Kotak Institutional Equities said in a report.
Also read: Infosys, Wipro and Tech Mahindra to witness revenue dip in Dec quarter: Kotak Institutional Equities
Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services, expected HCLT to emerge stronger on the back of healthy demand for its services in the medium term.
“With a strong margin outperformance, HCLT remains confident of achieving its margin guidance of 18-19%. Higher exposure to Cloud, which comprises a larger share of non-discretionary spending, offers better resilience to its portfolio in the current context amid higher demand for Cloud, Network, Security, and Digital workplace services,” Khemka said.
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Published: 10 Jan 2024, 08:45 PM IST
