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HCL Tech Q3 results preview: Modest profit growth likely; margins may decline

Anand Rathi expects HCL Technologies to post a profit of Rs 2,636.30 crore, a fall of 0.6%.

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Last Updated: Jan 17, 2020, 12.37 PM IST
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HCL Tech Q3 results: Here's what to expect
HCL Tech Q3 results: Here's what to expect
Mumbai: Dalal Street analysts expect IT services firm HCL Technologies to report modest gains in profits from a year ago in the December quarter. Margins may also fall sequentially in a seasonally weak quarter for the sector.

Anand Rathi Share and Stock Brokers expects revenue growth in constant currency terms of 0.8 per cent sequentially with IBM revenue contribution of $150 million.

“We expect margin to decline 80 bps, due to wage hikes, which will be offset by rupee depreciation and cross currency tailwind. Outlook, especially on IMS and ERD businesses, will be keenly watched along with update on IBM business (renewals, client feedback, churn in accounts),” Anand Rathi analysts said.

The brokerage expects FY20 revenue growth guidance to be maintained at 15-17 per cent in in constant currency terms with organic growth guidance at 10-11 per cent.

Anand Rathi expects HCL Technologies to post a profit of Rs 2,636.30 crore, a 0.6 per cent decline from a quarter ago, and 1 per cent gain on a year-on-year (YoY) basis.

Jefferies expects the IT firm to report 1.5 per cent sequential cc growth, which should translate into 16.2 per cent year-on-year CC growth.

“We expect it to comfortably beat the lower-end of its guided growth range of 15-17 per cent for FY20. As a result we expect it to raise the lower end of its guidance,” Jefferies said.

The brokerage expects 30 bps quarterly decline in EBIT margins. “Commentary on organic growth outlook and ramp up products acquired from IBM will be key to look out for.”

Jefferies expects the company to post a profit of 2,611 crore, a growth of 7 per cent from a year ago, and 5 per cent from the preceding quarter.

Motilal Oswal Financial Services expects sequential growth of 2.6 per cent in constant currency terms for the quarter ended December 31, and said it should benefit from positive seasonality associated with their product revenue streams.
The analysts said commentary around capital markets and renewals will be key moniterables.

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