HCLTech Q3 Results Preview: Verizon contract, ASAP deal may aid; Guidance in focus
On a sequential basis, HCLTech's EBIT margin is likely to improve by nearly 30 basis points on a sequential basis, led by margin expansion in the Products & Platforms business.
HCLTech might end up being one of the few IT companies that bucks the trend during the December quarter. While four out of the six top Indian IT companies are likely to report US Dollar revenue decline based on consensus estimates, HCLTech may be the outperformer, according to a CNBC-TV18 poll.
The poll also expects revenue in rupee terms to grow in the mid-single-digit, while margins may also see expansion compared to the September quarter.
On a constant currency basis, HCLTech may see revenue growth of 4% on a sequential basis. This is likely to be driven by the Verizon contract and from the ASAP acquisition. Brokerage firm Kotak Institutional Equities expects the Verizon to contribute 1.5% to the growth, while the ASAP acquisition for which the benefits will reflect only for two months, is likely to contribute nearly 1% to the growth.
Along with these, seasonal strength in the products business will also aid growth.
On a sequential basis, HCLTech's EBIT margin is likely to improve by nearly 30 basis points on a sequential basis, led by margin expansion in the Products & Platforms business.
The Guidance
For HCLTech, analysts believe that the company may cut its revenue growth guidance for financial year 2024.
The company had reduced its full-year guidance during the September quarter to 5% to 6% from 6% to 8% earlier. This was inclusive of contribution from the ASAP acquisition.
On an organic basis, revenue growth is seen at 4% to 5%. Services revenue for the company is expected to be between 4.5% to 5.5% on a constant currency basis, from 6.5% to 8.5% expected earlier.
HCLTech had cut its guidance earlier on account of continued softness in discretionary spend with no visibility on recovery. However, the company had maintained its EBIT margin guidance between 18% and 19%.
Apurva Prasad of HDFC Securities also said that he expects HCLTech to report the highest growth among peer companies ranging between 3.5% and 4%.
Last quarter, HCLTech had reported Total Contract Value worth $3.9 billion, the highest ever won by the company.
Shares of HCLTech had risen 18.7% during the October to December quarter, outperforming the Nifty IT index, which had risen by 12%.
(Edited by : Hormaz Fatakia)
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