HCL Technologies Q4 results today: Will it follow Infosys, TCS?

After Infosys and Tata Consultancy Services (TCS), HCL Technologies (HCL Tech) will announce its March quarter results today. Bigger peers TCS and Infosys, which announced their quarterly results last week, failed to meet Street expectations, triggering a selloff in IT stocks. A lack of visibility on order wins was an issue, analysts said. Will HCL Technologies follow the suit?

Sales growth

Infosys reported a 16 per cent YoY jump in consolidated sales at Rs 37,441 crore for the March quarter compared with Rs 32,276 crore in the same quarter last year. Analysts were expecting sales growth for the Bengaluru-based technology major at 20 per cent. The Mumbai-headquartered TCS, on the other hand, reported a 16.94 per cent YoY jump in consolidated sales at Rs 59,162 crore compared with Rs 50,591 crore in the same quarter last year. Analysts were expecting sales growth at about 20 per cent.

In the case of HCL Tech, Emkay Global expects sales to climb 18.8 per cent YoY to Rs 26,853 crore from Rs 22,597 crore YoY. Motilal Oswal expects this IT firm to report a 20.3 per cent YoY (1.8 per cent QoQ) rise in revenue at Rs 27,180 crore.

Profit growth

While TCS reported a 15 per cent year-on-year (YoY) rise in March quarter profit, Infosys logged a 7.8 per cent rise in the bottom line. HCL Tech is expected to report a single digit growth in profit. Adjusted profit is seen rising 9.6 per cent YoY to Rs 3,940 crore, said Motilal Oswal Securities. Emkay Global expects profit for this IT firm to rise 9.2 per cent YoY to Rs 3,923 crore compared with Rs 3,594 crore in the year-ago quarter.

Guidance

While TCS does not offer guidance, Infosys has guided for 4-7 per cent revenue growth in constant currency (CC) and 20-22 per cent Ebit margin for the financial year. Analysts were expecting Infosys to guide for a 5-8 per cent CC revenue growth guidance and 21-23 per cent Ebit margin guidance for the fiscal year. For HCL Tech, analysts largely expects the IT major to guide for a 5-7 per cent FY24 revenue growth in constant currency terms and 18-20 per cent FY24 Ebit margins.

HCL Tech may "start with annual revenue growth guidance of 5-7 per cent in CC terms for FY24E. On EBIT margin guidance, we expect it to be 18-19 per cent for FY24E after clocking 18.4 per cent in FY23E," ICICI Securities said.

Deal pipeline

For HCL Tech, deal wins, deal pipeline and pace of deal closures, any deferment of projects amid macro uncertainties, growth outlook for ER&D and software businesses and demand outlook for major verticals like BFSI, manufacturing, technology, retail and healthcare will be keenly followed. For the March quarter, Infosys' net new deal wins stood at $440 million, which were the lowest reported number since the pandemic. Overall, deal wins for the IT firm stood at $2.1 billion. TCS, on the other hand, won deals worth $10 billion, which was in line with Street estimates. 

Stock price target

Ahead of its quarterly results, the average price target for HCL Technologies at Rs 1,177, as per Trendlyne, suggests a 13 per cent potential upside ahead. TCS' price target of 3630 suggests a 17 per cent upside potential while Infosys' 1606 target suggests a 30 per cent potential upside.

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