Software services exporter HCL Technologies will declare its third quarter (October-December) results on Thursday. According to CNBC-TV18 poll, analysts expect profit after tax to rise 2.6 percent sequentially to Rs 1,453 crore in the quarter ended December 2013.
Revenues may increase 2.1 percent quarter-on-quarter to Rs 8,126 crore and dollar revenues are likely to grow 3.3 percent to USD 1312 million in the quarter gone by that will be closely watched because the company had disappointed the street.
In the quarter ended September 2013 (Q1), HCL Tech's dollar revenues had grown 3.5 percent, which was lower than its peers Infosys at 3.8 percent and TCS at 5.4 percent.
During December quarter, its rival Infosys reported dollar revenue growth of 1.65 percent and EBIT margin growth of 150 basis points to 25.02 percent.
Analysts expect cross currency benefits to add 50-100 basis points (to dollar revenues) due to dollar depreciating 4.4 percent against GBP, 2.7 percent against euro and about 1.3 percent against Australian dollar on a quarterly average basis.
Earnings before interest and tax (EBIT) is expected to fall 2 percent Q-o-Q to Rs 1,855 crore and EBIT margin may fall 98 basis points to 22.82 percent during December quarter, impacted by wage hikes.
Analysts say key to watch in HCL Technologies is nature of growth. Infrastructure management services (IMS) contributes about one-third of revenues, but accounts for more 75 percent of total incremental revenues for the fifth straight quarter (Q1).
IMS segment grew 8.8 percent in Q1 followed by 9.4 percent in Q4FY13, 8.6 percent in Q3, 11 percent in Q2, 10 percent in Q1 and 36 percent in FY13.
CEO Anant Gupta on January 14 said that HCL’s infrastructure management service, which is an underpenetrated market, will continue to grow at a rapid pace.
Software services segment contributes about 63 percent of total revenues, which grew only 4.2 percent year-on-year on last twelve months basis. In Q1FY14, this segment was up around 1 percent sequentially.
Analysts after September quarter results had raised concerns about the lop-sided nature of growth, which makes the street tad cautious about the sustainability of growth over the longer term.
So many analysts believe that a P/E re-rating in HCL Technologies requires broad-based industry-leading growth.
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