This analysts explains why HCLTech may cut revenue guidance
HCLTech's upcoming earnings report is poised to be a critical indicator of the IT sector's performance. Analysts and investors will be closely observing the company's financial results and any potential adjustments to its revenue guidance. The market eagerly awaits signs of improvement in the demand environment and hopes for a recovery in the IT sector in the coming months.
HCLTech, one of the leading players in the Information Technology (IT) sector, is likely to face a challenging quarter ahead. According to industry experts, the company may be compelled to revise its revenue guidance downward.
Sumeet Jain, an IT analyst from ICICI Securities, highlighted the possibility of HCLTech trimming the top end of its revenue guidance. This adjustment reflects the company's cautious approach amid a variety of market factors. Valuations in the IT sector, in particular, continue to lack appeal, making it challenging for investors to find attractive opportunities.
“We believe that they might cut the top end of their guidance this time around. So we are expecting a flattish growth for them in this quarter,” he said.
Furthermore, Jain expressed concerns regarding the future performance of the IT industry. He predicted that if the next two quarters turn out to be weak, the IT sector as a whole could experience further instability. This projection raises questions about the stability of demand in the coming months.
Many analysts anticipate muted earnings for HCLTech in the first quarter of the financial year 2023-2024. The IT services segment is expected to underperform due to weak seasonality, which is common during the June quarter.
Additionally, annual productivity benefits passed on to certain large customers further contribute to this anticipated decline. Analysts participating in a CNBC-TV18 poll forecast a net profit of Rs 3,809 crore for HCLTech, reflecting a 4.4 percent decline compared to the previous quarter.
While the outlook for IT service revenue growth remains positive, with a projected growth rate of two percent, the engineering and R&D (ER&D) services segment is expected to face challenges. This discrepancy indicates potential disparities in performance across various IT sectors.
In terms of revenue, HCLTech is expected to witness a modest sequential increase of 0.9 percent in dollar terms for the three-month period ending in June. In constant currency terms, the growth is estimated to range between 0.4 to 0.5 percent.
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