HCL Tech Q1 Results: Key Insights and Expectations

Synopsis: HCL Technologies Ltd (HCL Tech) is set to announce its Q1 results today, with analysts expecting a mixed performance. The company is projected to see a 4-8% YoY increase in profit and a 5-8% rise in sales. However, sequentially, it might report a 2% decline in revenue in constant currency terms and a 2.1% fall in reported dollar revenue due to offshoring and productivity pass-through. EBIT margins are expected to improve YoY but decline QoQ. Key metrics to watch include total contract value (TCV) of new deals, pricing scenarios, and growth outlooks for the Products & Platforms business.

HCL Technologies Ltd (HCL Tech) is set to announce its Q1 results today, with analysts predicting a range of outcomes for the IT giant. Sharekhan forecasts a 2% sequential decline in constant currency (CC) terms, compounded by 10 basis points of cross-currency headwinds. The reported dollar revenue is anticipated to fall 2.1% quarter-on-quarter (QoQ).

Year-on-year (YoY), HCL Tech is expected to see a 4-8% rise in profit for the June quarter, alongside a 5-8% increase in sales. However, sequentially, it may record the weakest performance among tier I peers due to the offshoring of a large client and productivity pass-through for others.

Despite these challenges, HCL Tech is likely to maintain its revenue growth guidance of 3-5% in CC terms for FY25 and retain its EBIT margin guidance of 18-19%. For the June quarter, the EBIT margin is projected to expand by 20-40 basis points YoY.

BOB Capital Markets expects an 8.2% YoY increase in profit, reaching Rs 3,822 crore, with a 6.2% rise in sales to Rs 27,935.80 crore. The EBIT margin is forecasted at 17.4%, up 42 basis points YoY. BOB Capital also highlighted that HCL Tech's QoQ growth numbers could be the worst among Tier-1 peers, largely due to the offshoring of a large client and productivity pass-through. Total contract value (TCV) for new deals is expected to be between $2-2.5 billion.

Sharekhan predicts a 2% sequential revenue decline in CC terms, with reported dollar revenue falling by 2.1% QoQ due to the offshoring of a large contract and seasonal productivity gains. The EBIT margin is expected to decrease by 70 basis points QoQ due to lower revenue, with profit estimated at Rs 3,534 crore, up 5.9%, and sales rising 6.5% YoY to Rs 28,012 crore.

Axis Securities projects a 1.6% QoQ revenue de-growth in rupee terms and a 55 basis points contraction in operating margin. Investors will be keenly watching for updates on deal TCV, pricing scenarios, and outlooks on growth, operating margins, and the Products & Platforms (P&P) business. Axis Securities anticipates a 7.7% YoY increase in profit and a 7.6% YoY growth in sales.