HCL Q1 profit up 7.6%; 10.5-12.5% growth forecast lifts stock

HCL Technologies, fourth largest software exporter, beat Street estimates to report a 7.6 per cent jump in June quarter profit to Rs 2,210 crore, as it business grew across divisions and regions. Revenue grew 7.2 per cent to Rs 12,462 crore, with more clients for digital services in an environment where there is pressure on outsourcing services. It had profit of Rs 2,053 crore on revenue of Rs 11,626 crore in the same period last year. HCL maintained its earlier revenue growth forecast of 10.5-12.5 per cent in constant currency for the year ahead.

“We see a positive environment. While the deal size is coming down for Mode 1 services (plain outsourcing), there is a huge opportunity in Mode 2 and 3 services as clients look for more digital services,” said C Vijayakumar, president and chief executive, via teleconference.

HCL said the operating margin was 19.5-20.5 per cent. Dollar revenue was up 3.7 per cent over the previous quarter, better than larger rivals Tata Consultancy Services (TCS), Infosys and Wipro. Analysts put a ‘buy’ recommendation on the shares, based on the results. “Revenue growth was broadbased across service lines. The revenue guidance (expectation) has been retained at 10.5-12.5 per cent in constant currency. The company further invested about $140 mn in IBM IPR in the area of automation, which would complement HCL’s digital and analytics offerings,” said brokerage Emkay Global Financial Services. “We maintain our positive view and believe it would continue to deliver sector-leading growth over FY17-20.”

Infosys had seen the quarter's profit grow only 1.4 per cent to Rs 3483 crore and revenue by 1.8 per cent to Rs 17,078 crore, on the back of improved efficiency and marginal growth from customers. TCS had reported muted numbers, on the back of slower growth from clients in banking & financial services and retail. Its quarterly profit dropped 5.8 per cent to Rs 5,950 crore and margins got hit due to currency fluctuation and impact of pay hikes. Revenue grew one per cent to Rs 30,543 crore, on the back of volume growth of 3.5 per cent, the highest in four quarters.

Wipro, the country’s third largest software exporter, said its quarterly profit rose 1.2 per cent to Rs 2,077 crore and revenue rose 0.2 per cent to Rs 13,626 crore. It has forecast 0.5-1.5 per cent growth in the quarter ahead. HCL reported broadbased growth across all revenue segments, with the Americas and Europe growing 16.9 per cent and 0.3 per cent, respectively, year-on-year. Financial services grew 19.2 per cent, manufacturing 17.1 per cent, life sciences and health care 10.6 per cent, public services 6.4 per cent, retail and CPG 7.1 per cent.

The Stock rose four per cent intra-day and closed Rs 1.85 or 0.2 per cent down at Rs 889.6 on the BSE.

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