IT company HCL Tech is expected to report a double-digit growth in revenue for the fourth quarter ended March 31, 2023, with estimates going as high as around 20.4 per cent, aided by ramp up of deals, well distributed across large and medium sized deals. “The deal pipeline remains healthy, which is well distributed across large and medium sized deals. Deal signing has seen some moderation, especially in the Europe region where conversion of deals from pipeline to TCV may see some delay for the next couple of quarters. The US region is expected to do well on steady deal momentum,” said ICICI Securities.
According to analysts and brokerage firms, HCL Tech is expected to clock a profit rise in the range of 3.5-15.9 per cent on-year during the fourth quarter and net sales will register an increase by around 17.6 per cent. “We expect Infosys and HCLT to target 6-8 per cent CC YoY revenue growth in FY24E,” said Elara Securities. HCL Tech will announce its March quarter results on April 20, followed by a press conference.
While the IT firm is expected to guide for 4-6 per cent revenue growth for FY2024, Kotak Institutional Equities expects implied services growth guidance of 5-7 per cent. “We expect weak 1QFY24 and pick-up of growth from 2QFY23, driven by the ramp-up of large deals won in the past quarters and bottoming out of headwinds from impacted verticals/clients,” it said.
Brokerage Estimates for HCL Tech Q4 FY23 financial results (on-year comparisons):
ICICI SecuritiesRevenue: Rs 26,503.8 crore; up 17.3%EBITDA: Rs 6,016.4 crore; up 19.1%PAT: Rs 3,719.3 crore; up 3.5%
Axis SecuritiesRevenue: Rs 26,553 crore; up 17.5%EBITDA: Rs 4,928 crore; up 21.1%PAT: Rs 3,830 crore; up 6.6%
HDFC SecuritiesNet sales: Rs 265.34 billion; up 17.4%EBIT: Rs 48.49 billion; up 19.2%APAT: Rs 37.17 billion; up 3.5%
Kotak Institutional EquitiesNet sales: Rs 264,671 million; up 17.1%EBITDA: Rs 59,720 million; up 18.6%PBT: Rs 50,341 million; up 16.9%
BOBCAPSRevenue: Rs 2,72,083 million; up 20.4%EBIT: Rs 50,880 million; up 25.8%PAT: Rs 41,629 million; up 15.9%
SharekhanSales: Rs 26,575 crore; up 17.6%Operating margin: 22.1%Net profit: Rs 3,813 crore; up 6.1%
Elara SecuritiesNet sales: Rs 2,71,990 million; up 20%EBITDA: Rs 61,198 million; up 21%Recurring PAT: Rs 38,752 million; up 8%
Sectoral performance of HCL Tech on sequential basis
While Q4 is seasonally a weak quarter due to “fewer working days and furlough impact in January”, how will HCL Tech’s different verticals perform during the quarter? “We expect HCL’s IT services business to report 1 per cent CC revenue growth for the quarter aided by ramp up of deals but at the same time weakness mentioned by the company in their recent analyst meet in Hi-Tech and Media & Entertainment verticals are likely to have some impact in Q4. We expect ER&D business to continue its growth momentum and expect it to grow 2 per cent sequentially. P&P business will likely impact QoQ on seasonality,” said ICICI Securities.
On the margin side, ICICI Securities added that IT services margins are expected to improve on pricing discipline, operational efficiencies while margins for P&P business are likely to see a sharp decline sequentially on seasonality. “We expect EBIT margin to decline 140 bps on-quarter,” said Kotak Institutional Equities.
What to watch from HCL Tech Q4FY23 results?
While HCL Tech remains a preferred pick for brokerage firms, among tier-I IT players, what will be the key things to look out for as HCL Tech announces its quarter results? Kotak Institutional Equities said, “We expect investor focus on: 1) revenue growth guidance for FY2024 and whether growth can be among industry leaders, 2) impact on discretionary businesses, i.e., products and ERS in the event of recession, 3) exposure to impacted verticals/clients and when revenue will bottom out in these segments, 4) outlook on revenue growth in Europe, 5) levers to increase margins to normalized band, 6) large-deal activity in the market, especially noting HCLT’s higher dependence on large deals for growth, and 7) changes to hiring plans in FY2024 in a deteriorating macro environment.” HCL Tech also said, in a regulatory filing earlier, that it will announce the interim dividend for the financial year 2023-24.