HCL Tech Q1 results preview: Here is what top brokerages expect

IT giant HCL Technologies will release its April-June quarter (Q1FY23) results on Tuesday. Analysts expect the company to post 2.4-3 per cent sequential revenue growth in constant currency (CC) terms. This, they say, will be led by IT services and Engineering and R&D services (ERD).

On the flipside, the company's Ebit margins are expected to decline by up to 108 bps to 16.9 per cent over the preceding quarter due to elevated attrition and rise in discretionary expenses.

Three of the six brokerage estimates compiled by Business Standard expected a marginal decline in Ebit margins of 5-9 bps QoQ.  

That said, analysts expect the company to maintain its FY23 guidance of 12-14 per cent CC revenue growth and EBIT margin of 18-20 per cent.

Key monitorables
 

Commentary on demand environment; outlook on the services segment and product business given lackluster performance in the latter; margin trajectory given supply-side challenges and higher attrition; commentary on deal wins and deal pipeline; and steps taken to manage attrition rate and supply-side challenges.

What brokerages say:
 

ShareKhan: The brokerage expects CC QoQ revenue growth of 2.6 per cent and cross-currency headwinds of 170 bps. The product business is expected to remain flat sequentially, while growth in service business (IT and ERD) would be driven by ramp up of deals won earlier.

It estimates Ebit margins to decline by 77 bps QoQ owing to supply-side pressures, partially offset by currency tailwinds. Net profit is estimated to decline by 9.9 per cent from Q4FY22 to Rs 3,238 crores.

BNP Paribas: It expects HCL Tech to highlight lack of demand visibility for the second half of FY23 (H2FY23). Besides, it expects the company to report a 2.9 per cent sequential CC revenue growth and a 9 bps decline in Ebit margin to 17.9 per cent.

Kotak Institutional Equities: The brokerage forecasts a modest CC sequential revenue of 2.4 per cent and 14.4 per cent YoY. While Services growth will be powered by continued strength in deals, Products business revenue will likely stay flattish at $306 million. It expects growth in total contract value of net new deals to be above $2 billion from $1.7 billion in the year-ago period. Ebit margins are expected to fall to 17.1 per cent.

Phillip Capital: Analysts expect CC revenue growth of 2.8 per cent to be driven by services (IT services & ERD) while products and platform business (P&P) is expected to grow on a low base of last quarter. Margins are likely to decline 50 bps, which may be offset by rupee depreciation.

Motilal Oswal: CC growth will be robust due to deal conversion in IT services and P&P seasonality. Margin in Services will remain stable from last quarter, but overall profitability will stay below guidance. The net profit is expected to slide by 6.2 per cent from Q4FY22.

IDBI Capital: IDBI Capital expects dollar revenue to grow 2.2 per cent QoQ partially offset by 20 bps cross currency impact. It expects Ebit margin to decline by 108 bps QoQ.