We estimate the company to clock 3.4% and 2.2% dollar and constant currency (CC) revenue growth QoQ, respectively. We expect organic revenue to jump 1.6% QoQ, while inorganic revenue from IP-deals will fuel revenue growth by additional 60bps.
The revenue growth guidance is pegged at 8-10% for FY19, after including inorganic portion of 150bps. Margin guidance is expected to be maintained in the 19.5-20.5% range. We believe, the IT major is well positioned to post modest revenue and earnings growth due to robust order book and improving outlook in IMS business.
Expect CC growth of 2% QoQ aided by IP partnership and cross currency tailwinds of about 100bps for the quarter. We expect operating margins to improve by 60bps QoQ supported by operational efficiencies and normalisation of wage hike impact in previous quarter. Profit after tax (PAT) is expected to be flat sequentially.
We expect HCL Tech’s dollar revenue to grow 3.2% QoQ and 2% QoQ on a CC basis. Growth during the quarter will be a function of a pick-up in IMS and a seasonal drop in IP revenue. With this, we expect the company to close the year with dollar revenue growth of 12.6%, which would translate into 10.8% constant currency growth, at the lower end of its 10.5-12.5% guidance.
EBIT margins are likely to expand by 20bps to 19.8% because of lower amortization related to the IP partnerships. We expect 19.8% EBIT margin for FY18, within the 19.5- 20.5% guidance range. Adjusted PAT estimate for the quarter is Rs 23.5 billion (+7% QoQ), also aided by higher other income.
HCL Tech’s growth prospects are based on: (1) recovery in IMS ahead, supported by large wins (US CPG major) and multiple mid‐sized deals, (2) scale dominance and IP partnerships driving ER&D services, (3) increasing deal size (in digital) and strong deal wins (strongest quarterly bookings in the past three years with 20 transformational wins). Expect revenue/EPS growth at 11/10% CAGR over FY18‐20E.