HCL Tech revenues may rise up to 6% QoQ to Rs 26,214 cr in Q3FY23: Analysts

HCL Tech Q3 preview: As per five brokerage estimates, analysts peg EBIT margins to see an uptick in the range of 53-60 basis points (bps) QoQ to 18.5 per cent in Q3FY23

IT services major HCL Technologies is likely to clock up to 6 per cent revenue growth quarter-on-quarter (QoQ) to Rs 26,214 crore in the December quarter of this fiscal year (Q3FY23) from Rs 22,331 crore in Q2FY23, estimate analysts. The company is scheduled to announce results on Thursday, January 12.

As per five brokerage estimates, analysts peg EBIT margins to see an uptick in the range of 53-60 basis points (bps) QoQ to 18.5 per cent in Q3FY23, driven by easing supply-side constraints, better utilisation levels, and higher growth in products and platforms (P&P) business segment. Net profit, meanwhile, is likely to improve 9.6 per cent to Rs 3,825 crore.

On the bourses, shares of HCL Technologies outperformed peers as it surged 11.48 per cent in Q3FY23, whereas Infosys and TCS rose up to 8 per cent. In comparison, the Nifty50 index advanced 5.9 per cent, during the same period.

Key monitorables: Management’s commentary on new deal ramp up, outlook on financial services and manufacturing vertical, update on outlook and margin from product and engineering businesses, deal total contract values, attrition rate, and CY23 budget commentary.

Here’s a snapshot of Q3FY23 estimates for HCL Tech by top brokerage houses:

Motilal Oswal

The brokerage firm expects the IT services major to report 19.6 per cent year-on-year (YoY) revenue growth to Rs ~26,700 crore in Q3FY23 from Rs 22,300 crore in the preceding quarter. Adjusted profit-after-tax (PAT), too, is likely to improve 13.2 QoQ per cent to Rs ~4,000 crore. The third quarter of this fiscal year is seasonally strong for P&P, while engineering, research, and development (ER&D) is likely to aid growth for the services segment. Analysts shared a ‘buy’ rating on the counter, with a target price of Rs 1,280 per share.

Axis Securities

Analysts anticipate revenue growth of 3.4 per cent QoQ to Rs 25,518 crore in Q3FY23 from Rs 24,686 crore in Q2FY23. Moderation in supply constraints is expected to improve margin profile of the company by 53 bps QoQ to 18.5 per cent from 17.9 per cent. Moreover, strong deal wins are likely to grow PAT 5.2 per cent to Rs 3,670 crore from Rs 3,489 crore.

Sharekhan

The brokerage firm pegs highest revenue growth of 3.6 per cent QoQ to $3,197 in cross currency (CC) terms for HCL Tech among Tier-1 IT companies. EBIT margin, on the other hand, is likely to improve 17 bps QoQ to 18.5 per cent in Q3FY23 from 17.9 per cent in Q2FY23, as higher furloughs would partially offset rupee depreciation and lower subcontracting expenses. Analysts share a ‘buy’ rating on the stock, with a target price of Rs 1,140 apiece.

Reliance Securities

Analysts forecast 3.3 per cent QoQ revenue growth in CC terms to $3,198, on the back of strong double digit growth of ~20 per cent QoQ in P&P business. Better utilization levels coupled with higher P&P growth is likely to expand EBIT margin by 53 bps QoQ to 18.5 per cent in Q3FY23 from 17.9 per cent in Q2FY23. Net income, too, is expected to rise 10 per cent QoQ to Rs 3,837 crore in Q3FY23.

Nirmal Bang

While the services business is expected to grow 2.7 per cent QoQ in cc terms, the P&P segment is likely to see modest growth of 5 per cent QoQ in Q3FY23. Analysts expect 60 bps growth in EBIT margin to be driven by rupee depreciation, and a slight shift in revenue mix towards higher margin P&P business. However, the total contract value (TCV) is expected to be flattish in the range of $2-2.5 billion. Analysts also believe that the moderation of quarterly attrition (23.8 per cent in Q2FY23) will continue in Q3FY23 as well.