HCL Tech Q2 Results Preview: IT major to report single-digit growth, may cut revenue guidance to 4-6%


HCL Tech Q2 result preview: HCL Technologies will announce its July-September quarter results for fiscal 2023-24 (Q2FY24) on Thursday, October 12 along with its IT peer Infosys. D-Street analysts and domestic brokerages widely expect India’s third largest IT services major to report softer growth in the September quarter and reduce its revenue guidance to 4-6 per cent from 6-8 per cent.

According to domestic brokerage firm JM Financials, HCL Tech is likely to see a modest improvement in growth and margin expansion during the quarter-under-review. “A likely soft 2Q and only a modest improvement in 2H should therefore induce guidance cut or moderation in outlook for most, except Infosys.

HCL Tech Q2 Results: Brokerages expect reduction in revenue guidance

‘’We expect HCL to reduce its organic Services/Consol. revenue growth guidance by 2 ppt to 4.5 per cent-6.5 per cent and 4 per cent-6 per cent respectively,” said the brokerage in its report. For the current fiscal, domestic brokerage Ambit expects a cut in HCL Tech’s revenue guidance to 5-7 per cent. Nirmal Bang also believes that there is a fair probability of the 6-8 per cent growth guidance being revised slightly lower.

Ramp-up and, hence, revenue conversion for mega deals have been in focus for a long time. Owing to the likely soft Q2 and only a modest improvement in the second half, there is an expectation of a guidance cut or moderation in the outlook for most players, except Infosys, noted JM Financial.

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‘’Growth across tier-I Indian software exporters is seen to remain muted, with the only exception being HCL Technologies,” said IDBI Capital in its earnings preview report. The brokerage expects TCS, HCL Technologies, Infosys, and Coforge to see margin expansion.

Recently, HCL Tech had announced that the wage hike cycle will be skipped for the mid-level and senior employees, while that for the junior employees has been pushed back to the October-December quarter of current fiscal.

Also Read: Q2 earnings: TCS, Infosys, HCL Tech, Avenue Supermart & Delta Corp lined-up

In the preceding April-June quarter of current fiscal, HCL Tech reported a 7.6 per cent year-on-year growth in consolidated net profit. The IT major’s profit after tax declined by 11.27 per cent in Q1FY24, compared to of 3,983 crore in the preceding March quarter of fiscal 2022-23.

A significant drop in its Engineering Research & Development (ER&D) revenue led to a decline in the company’s June quarter revenue. The ER&D business accounts of 15.4 per cent of the company’s overall revenue and the business saw a sequential drop of 5.2 per cent sequentially and 1.8 per cent year-on-year due to project ramp-down in hi-tech and telecom.

Also Read: HCL Technologies share price hits 52-week high on multiyear cloud services agreement with Siemens

HCL Tech’s EBIT, or earnings before interest and tax, a key metric of profitability, came in at 4,438 crore in the June as against 4,836 crore in the preceding quarter, according to the brokerage.

Meanwhile, last month, HCL Technologies share price touched a fresh 52-week high after following the signing of a multiyear Managed Public Cloud Services agreement with German technology and high-tech industry behemoth Siemens AG.

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