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Jan 17, 2013, 08.20 AM IST | Source: Moneycontrol.com

Here's what to expect from HCL Tech's Q2 earnings

India's two largest software services providers Tata Consultancy Services and Infosys have already topped street expectations in Oct-Dec and all eyes will be now on HCL Technologies, which will report its earnings on Thursday.

Moneycontrol Bureau

India's two largest software services providers Tata Consultancy Services and Infosys have already topped street expectations in Oct-Dec and all eyes will be now on HCL Technologies , which will report its earnings on Thursday.

The Gurgaon-based information technology company is expected to report a net porfit of Rs 840 crore, down 5 percent quarter-on-quarter, while revenue is seen up 2 percent at Rs 6,207 crore, according to a CNBC Awaaz poll.

HCL Tech has had robust growth over last several quarters helped by strong deal wins and growth across verticals and geographies. Its July-Sep net profit zoomed 78 percent year-on-year, while revenue gained 31 percent. In US Dollar terms, its net income and revenue rose 4 percent and 3 percent quarter-on-quarter respectively.

Analysts expect strong evenue growth will continue in Oct-Dec, its second quarter.

"We expect it to continue to register solid growth with a 3 percent quarter-on-quarter revenue growth in US Dollar terms," say Anantha Narayan and Sagar Rastogi of Credit Suisse. The analysts, expect net profit to fall 5 percent sequentially, but up 48 percent year.

Priya Rohira, ED - IT and Telecom at Axis Capital expects HCL Tech's profit will decline 9 percent quarter-on-quarter due to forex loss and higher tax rate, but feels the company will continue to deliver revenue growth at the top-end of the large caps.

However, both Credit Suisse and Axis Capital feel EBIT margins will be lower due to the impact of wage hikes. The Credit Suisse analysts, in fact, expect margins will drop 150 bps sequentially.

Key things to Watch

-- Volume growth in the quarter in software services and IMS
-- Deal wins in the quarter
-- Margin performance and pricing trends
-- Comments with respect to clients budgets and discretionary spending
-- A light on how the year looks ahead
-- Growth plans

Stock Watch

HCL Technologies shares closed up 1.5 percent at Rs 673.80 on NSE on Wednesday.Since Sept. end the stock has gained 17 percent, outperforming the wider CNX IT index, which is up 8 percent in the same period.

Credit Suisse has an "outperform" rating on the stock, while Axis Capital advises a "buy."

Nachiket Kelkar
nachiket.kelkar@network18online.com

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