HCL Technologies edges up ahead of Q3 earnings, analysts expect 10% profit growth

The total contract value in terms of deal wins might be flat in Q3 FY23 around $2 billion, compared to $2.38 billion recorded in the previous quarter.

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HCL Technologies shares edged higher in the morning session on January 12 ahead of its December quarter earnings due later in the day.

At 10:13am, HCL Technologies was quoting at Rs 1,067.90, up Rs 13.10, or 1.24 percent, on the BSE. It has touched an intraday high of Rs 1,074.00 and an intraday low of Rs 1,061.

Analysts are forecasting a 3 percent sequential growth in constant currency (CC) terms, which is likely to be greater than its peers.

According to a poll of brokerages, consolidated revenue might come in at Rs 26,026 crore, registering 16.6 percent yearon-year (YoY) growth, while consolidated profit after tax (PAT) is expected to increase 10.6 percent YoY to Rs 3,796 crore.

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At its investor day held on December 8 in New York, the company’s management had flagged off that Q3 FY23 will see higher-than-expected furloughs, with BFSI and hi-tech being the problem areas.

Analysts are pegging earnings before interest and tax (EBIT) margin at 18.9 percent for the quarter. This indicates a near 95-basis-point (bps) expansion. One basis point is one-hundredth of a percentage point.

The total contract value in terms of deal wins might be flat in Q3 FY23 at $2 billion, compared to $2.38 billion recorded in the previous quarter. As indicated earlier by the management, the company believes it will continue to win deals in North America while Europe may see some slowdown.

Domestic research and broking firm has an ‘accumulate’ rating on the stock with target of Rs 1,192 per share.

“HCL Tech is among the top four IT services companies based out of India and provides a vast gamut of services like ADM, Enterprise solutions, Infrastructure management services etc. IT services witnessed robust growth of over 5 percent QoQ constant currency (CC) in Q4FY22 which was offset by seasonal de-growth of 24 percent QoQ CC in the product business of,” it said.

“New deal total contract value (TCV) at $2.3 billion was up by 6 percent QoQ and included many large deals. Strong deal wins will help drive growth in the services business, which should make up for the continued softness in the product business.”

At the current market price, the stock is trading at a significant discount to the other large cap IT companies like Infosys and TCS and offers tremendous value at current levels given market leader status in Infrastructure management.

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