HCL Technologies Q2 preview: PAT rise seen between 10.5% - 13.6% YoY

HCL Technologies, the Noida-headquartered information technology (IT) services company, is slated to announce its financial results for the second quarter (July-September) of the current fiscal year (Q2FY21) on Friday, October 16. Like its peers, Infosys and Tata Consultancy Services (TCS), HCL Tech is also expected to report healthy numbers for the quarter under review.

Last month, in a mid-quarter update, the company's management had said that the revenue and the operating margin for the July-September quarter (Q2FY21) were expected to be meaningfully better than the top end of the guidance it had provided in July’2020. The company, while announcing its Q1FY21 numbers in July, had guided for a 1.5- 2.5 per cent growth in revenue for the remaining quarters of FY21, in constant currency terms. READ MORE

During the September quarter, shares of HCL Technologies surged around 45 per cent as compared to a 9 per cent gain in the S&P BSE Sensex, ACE Equity data show.

Here's a look at what brokerages expect from HCL Tech's September quarter results.

HSBC

The global brokerage firm estimates 3.5 per cent sequential growth in revenue in constant currency while in US dollar terms, revenue is seen at $2,478 million, up 5.2 per cent quarter-on-quarter (QoQ). Strong Euro and GBP (British pound) should add another 170 bps to US dollar growth, it adds. On a YoY basis, US dollar revenue will fall by 0.3 per cent. In rupee terms, revenue is expected to come in at Rs 18,510.9 crore, up 3.8 per cent QoQ and 5.6 per cent YoY. Earnings before interest, and tax (Ebit) is estimated to grow 4.6 per cent QoQ and 9.5 per cent YoY to Rs 3,831.8 crore. Ebit margin is seen at 20.7 per cent - up 20 bps QoQ and 70 bps on a YoY basis. Net profit is expected to grow 0.3 per cent QoQ and 10.5 per cent YoY at Rs 2,934.8 crore.

"For HCLT, guidance for 3Q and 4Q is for 1.5-2.5 per cent sequential growth, and we don’t expect a change in this guidance, but if management alluded to higher confidence in the upper end of the guidance, that could be a positive surprise," HSBC said in a result preview note. Commentary on renewal demand for products and platforms (especially IBM IP) along with demand recovery in Engineering, Research and Design (ER&D) will be crucial, it notes.  

Nirmal Bang Securities

The brokerage expects US dollar revenue to grow 5 per cent QoQ at $2,473 million. In constant currency, revenue is expected to grow 4 per cent. In rupee terms, revenue is seen at Rs 18,396.6 crore, up 5 per cent YoY and 3.1 per cent QoQ. Ebit is expected to rise 8.5 per cent YoY and 3.6 per cent QoQ at Rs 3,793.4 crore. PAT (profit after tax) or net profit is seen at Rs 3,057.2 crore, up 15.3 per cent YoY and 4.5 per cent QoQ.

"We will look out for change in guidance, if any, for 2HFY21," the brokerage said. Further, commentary on any granular level data on its HCL Software business will be closely watched, it said

IDBI Capital

Analysts at IDBI Capital forecast revenue growth of 3.9 per cent QoQ in constant currency and and cross-currency benefit of nearly 150 bps. Revenue in US dollar terms is seen at $2,484 million, up 5.5 per cent QoQ but a decline of 0.1 per cent YoY. In rupee terms, revenue is seen at Rs 18,474.3 crore, up 3.5 per cent QoQ and 5.4 per cent YoY. Ebit is estimated to increase by 5.1 per cent QoQ and 10 per cent YoY at Rs 3,847.9 crore while Ebit margin is expected to improve by 31 bps QoQ to 20.8 per cent with benefit of strong revenue growth and operational efficiencies offsetting the impact of rupee appreciation. On a YoY basis, margin will rise by 88 bps. Net profit is estimated at Rs 3,010.5 crore, up 3 per cent QoQ and 13.6 per cent YoY.

The brokerage expects HCL Tech to maintain a compounded quarterly growth rate (CQGR) of 1.5 per cent - 2.5 per cent for H2FY21. Outlook for H2FY21 across all verticals and for Mode 1/2/3 solutions, commentary on deal pipeline and pricing, and on structural change in delivery model and outlook on EBIT margin will be the key focus areas.