According to Emkay Global Financial Services, HCL Tech could revise its revenue guidance for FY21 upward to 2.5 per cent-3.5 per cent, factoring in DWS acquisition.
Strong growth in cloud adoption, improvement in mode 2 revenues and easing of stress in ER&D segment could drive HCL Tech revenue up by 6.1 per cent YoY and 3.5 per cent QoQ to Rs 19,241.7 crore, said ICICI Direct. The firm had posted a revenue of Rs 18,135 crore in the same quarter last year and Rs 18,594 crore in the preceding quarter.
The brokerage sees revenue growth of 4 per cent QoQ in dollar terms and 3.4 per cent in cc terms.
Meanwhile, analysts at Phillip Capital expect revenue to rise 5.2 per cent YoY and 2.6 per cent QoQ to Rs 19,077.1 crore. "We expect dollar revenue growth of 3.1 per cent at $2,584 million and positive cross-currency impact of 70 bps, implying cc revenue growth of 2.4 per cent," said Phillip Capital in its earnings preview report.
On the lower end of the band, Emkay Global is pencilling in revenue growth of 4.6 per cent YoY and 2 per cent QoQ at Rs 18,970.2 crore. We are building in 2.5 per cent QOQ dollar revenue growth with 50bps cross-currency tailwinds, it said.
HCL Tech's profit after tax (PAT) could rise between 2 per cent and 5.5 per cent YoY but could decline or stay flat sequentially, according to brokerages.
On the higher end, Sharekhan pegs Q3 PAT at Rs 3,205 crore, up 5.5 per cent YoY and 2 per cent QoQ. This is against a Rs 3,038 crore profit posted by the firm in Q3 of FY20 and Rs 3,142 crore in the previous quarter of same fiscal.
Meanwhile, on the lower end, ICICI Direct sees only 2 per cent rise in HCL Tech's Q3 profit to Rs 3,097.6 crore and rather expects it to decline 1.4 per cent sequentially. Brokerage Emkay Global said profit may remain flat QoQ but rise 3.5 per cent YoY.
Impact on EBIT margin
Brokerages expect earnings before interest and tax (EBIT) margin to decline in the quarter under review.
ICICI Direct said EBIT margins are expected to decline 96 bps QoQ, mainly led by partial wage hikes. However, Emkay Global sees a decline of only 30 bps as it expects operating efficiencies and cost optimization measures to offset the wage hike impact. Those at Sharekhan and Phillip Capital see a 42 bps and 60 bps contraction in Q3 EBIT margins, respectively.
HCL Tech's EBIT margins stood at 20.2 per cent in the corresponding quarter last year and at 21.6 per cent in the September quarter.
Sharekhan expects the company to maintain its margin guidance of 20 per cent-21 per cent for FY21.
At the bourses, shares of HCL Tech have risen 16.57 per cent in the three months ended December 2020 as against a 21.55 per cent rise in Nifty IT index and 24.30 per cent gains in benchmark Nifty50. Meanwhile, on a year-to-date basis, the stock is up 12 per cent till January 13, 2021.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.