HCL Technologies is likely to deliver fall in profit in Q4 but its revenue growth could be higher than peers. The company will announce results on May 9.
Brokerages expect profit to decline marginally compared to the previous quarter, partly impacted by tepid operating income growth.
Prabhudas Lilladher expects net profit to fall 2.9 percent sequentially to Rs 2,536.4 crore while Motilal Oswal sees 1.2 percent decline QoQ.
But revenue growth is likely to be higher than its closest peers TCS, Infosys, Wipro and Tech Mahindra.
Brokerages expect dollar revenue growth in the range of 2.7 percent to 3.3 percent compared to the previous quarter as deal momentum has been extremely strong with announcements of several large and mega deals.
"We expect HCL's revenue to grow at 3.3 percent QoQ in USD terms and 3 percent QoQ in constant currency, mainly due to continued traction in IMS backed by its double-digit sequential growth in Q3FY19," Motilal Oswal said.
According to Edelweiss, revenue is likely to grow 3.1 percent in USD and 2.9 percent in constant currency terms on account of strength in Mode-3 business and continued recovery in the IMS business.
"We believe that HCL Tech should guide for revenue growth upwards of 15 percent YoY CC due to contributions from: (1) improved organic growth, (2) revenues from IBM’s IP purchases (around 5.5 percent), (3) recent mega deal with Xerox (around 2 percent), and (4) residual impact from acquisition integration in FY19 (around 0.5-1 percent)," Motilal Oswal said.
On guidance, Kotak expects the company to guide for 14-16 percent revenue growth which includes an inorganic component of 5.4 percent revenues from the IBM products buyout.
It expects HCL to guide to 8.5-10.5 percent revenue growth excluding IBM products but including other inorganic components.
Brokerages say EBIT margin may contract sequentially due to rupee appreciation but could be within the guidance given by management.
"Operating margin is likely to be 19.7 percent, in line with management guidance of 19.5–20.5 percent. INR appreciaition, partially offset by operational efficiencies, should erode EBITDA margin by 10bps," Edelweiss said.
Kotak also expects EBIT margin to decline 10 bps due to rupee appreciation and elevated investments in the business
Key things to watch out for would be:
1) Overall guidance for FY20, organic and inorganic contribution
2) Mode 1: Demand for IMS services and growth in BFSI vertical
3) Mode 3: Plan to launch more HCL branded products and ability to sell them in the market
4) Capital allocation in light of aggressive product acquisitions
5) Deflationary impact from renewal of legacy IMS deals
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