HCL Technologies to announce Q1 earnings on July 27, 4 factors to watch out

Revenue

Dollar revenue growth is expected to be 4 percent at USD 1,890 million against USD 1,817 million on sequential basis, which looks better than peers (TCS 3.10 percent), Infosys (3.2 percent) and Wipro (0.9 percent).

Dollar revenue growth may be driven by inorganic moves i.e. buyout of Geometric and partnership deal with IBM and also currency tailwinds. Infrastructure business is likely to return to growth in June quarter.

Revenue in rupee terms may grow 1.14 percent to Rs 12,191 crore from Rs 12,053 crore on quarter-on-quarter basis.

Operational Growth

Earnings before interest and tax during the quarter is seen falling to Rs 2,383 crore from Rs 2,416 crore QoQ and margin may contract 50 basis points to 19.5 percent, impacted by rupee strength and M&A dilution.

Guidance

Analysts feel FY18 guidance is likely to be maintained. The company expects constant currency revenue growth at 10.5-12.5 percent in FY18 against 13.7 percent in FY17 and dollar revenue growth at 9.9-11.9 percent against 11.86 percent in FY17, implying compounded quarterly growth rate of 2.1-2.9 percent for four quarters.

Margin guidance is 19.5-20.5 percent in FY18 against 20.3 percent in FY17.

The stock has been best performing IT stock over the last one year, rising 20 percent against its peers Infosys (down 7.5 percent) and TCS (flat).