HCL Technologies to outshine IT peers in Q3 results: Elara Securities

Q3 IT preview: Elara Securities said that added that other large firms may witness a revenue dip of 1-1.3 per cent QoQ CC given weak seasonality

The Indian IT sector is expected to post muted results for the third quarter of 2023-24 (FY24), and HCT Technologies may outshine its peers, Elara Securities said in a note on Wednesday. It said that the sector is expected to record an average constant currency (CC) growth of 1.4 to 1.6 per cent quarter-on-quarter (Q-o-Q).

"HCL Tech to outshine with an estimated 4.8 per cent Q-o-Q CC growth, led by both Services business (buoyed by Verizon deal) and favourable seasonality for its Products business," the note read. It added that other large IT firms may witness a revenue dip of 1-1.3 per cent QoQ CC given weak seasonality.

"Expect TCS, Infosys, Wipro and TECHM to see 1 per cent, 1 per cent, 1.4 per cent and 1.3 per cent QoQ CC revenue dip," Elara Securities said.

LTI Mindtree may post revenue growth of 1 per cent Q-o-Q.

The IT companies will start declaring their Q3FY24 results on January 11. Infosys and Tata Consultancy Services (TCS) will announce the earnings on January 11, followed by HCL Tech and Wipro on January 12.

Elara also highlighted that except for Coforge, all the companies may post flat to lower operating margins sequentially.

"Operating margins for Elara IT universe may be under pressure owing to furloughs, though partly offset by operational efficiencies. Except for Coforge, we anticipate sequentially flat-to-lower operating margin," it said.

In smaller IT firms, Elara noted that Persistent Systems may lead the growth at around 2.7 per cent Q-o-Q led by resilient tech spending in Hi-tech. Mphasis may, however, see the fastest growth led by the integration of the Silverline acquisition.

It also noted that in 2024, investors should expect the disconnect between revenue growth and deal wins to continue. The revenue growth is weak against high deal wins.