 "Q3FY24 preview: Profit seen flat for HCLTech, Wipro's may drop 11% YoY")
IT majors Wipro and HCLTech are slated to release their respective December quarter (Q3FY24) earnings on Friday, January 12.
Let’s look at how their earnings may pan out:
Wipro: The company is likely to report a nearly 11 per cent decline in its net profit to Rs 2,724 crore versus Rs 3,053 crore reported last year.
Revenue is also expected to fall 5 per cent YoY to Rs 22,187 crore, as per an average of 6 brokerage estimates. SEE HERE
Revenue is also expected to fall 5 per cent YoY to Rs 22,187 crore, as per an average of 6 brokerage estimates. SEE HERE
Sequentially, revenue will likely be 1.6 per cent lower, while net profit may be 3 per cent higher.
The Ebit margin is projected to decline to anywhere between 14-15.7 per cent from 16.3 a year ago as higher furloughs and wage hikes will weigh.
Brokerages expect constant currency revenue to decline between 1.5-2.7 per cent on a QoQ basis in line with the Q2 guidance of -3.5 to -1.5 per cent.
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This will be due to cuts in discretionary spending and high furloughs in hi-tech and financial services, said analysts.
Kotak Institutional Equities (KIE) said it expects muted TCV and ACV numbers given no significant deal win announcements.
For the next quarter (Q4), it expects a revenue guidance of -1 per cent to growth of 1 per cent.
Among monitorables, Dalal Street will watch out for reasons for senior leadership attrition, lag in growth rates versus peers, outlook for consulting business (Capco and Rizing), outcome of clients annual budgeting exercise, among others.
HCLTech: The company is estimated to report flat profit growth in Q3 from last year.
As per an average of brokerage estimates, the company may post net profit of Rs 4,101 crore versus Rs 4,096 crore reported last year. Though on a QoQ basis, this may be 7 per cent higher.
Revenue growth on a yearly basis could be 5.5 per cent higher to Rs 28,162 crore. SEE ESTIMATES
Sequentially too, this may be 5.6 per cent higher.
In constant currency (cc) terms, HCL Tech is expected to lead growth over its tier-1 peers driven by full quarter contribution from ASAP Group acquisition and ramp up of the Verizon deal, said analysts at Sharekhan.
Brokerages expect cc revenue to grow 4.3-5.9 per cent over the last quarter.
The cc revenue growth will be led by $50 million incremental revenues from the Verizon contract, contributing 1.5 per cent to growth and $30 million incremental revenues from the ASAP acquisition, driving 1 per cent incremental contribution, estimated analysts at KIE.
They further account $70 million of incremental revenues from the products business (2.3 per cent contribution) due to seasonal strength in products.
Net new deal wins will moderate to the $2-3 billion range after a strong Verizon-led showing in the September quarter, they said.
Ebit margin is largely seen rising QoQ to as much as 19 per cent with some impact from wage hikes. In Q2, it stood at 18.5 per cent.
Elara Securities expects strong seasonality to lead to 30 per cent QoQ growth in the product business.
ER&D business is also seen strong, while higher furloughs in hi-tech and BFSI could drag down growth, it said.
As per KIE, HCLTech is likely to retain the overall cc revenue growth guidance of 5-6 per cent and organic growth guidance of 4-5 per cent for FY24.
The Ebit margin guidance of 18-19 per cent will also likely be unchanged.
Investors will look out for demand outlook for ER&D services, P&P business, outlook on discretionary spending environment and client budgets for 2024.