The stock was buzzing in trade on Thursday, as it ended 1.50 per cent higher. The stock was also the top gainer on the Nifty IT index, when the market closed today.

“IT services sector is expected to report muted growth in Q4FY24 primarily on account of a weaker discretionary spend due to challenging times in the world’s largest economies,” said Axis Securities in a note

Here’s what brokerages said:

HSBC Global Research

Analysts at HSBC Global Research expect HCLTech’s revenue to grow 1.7 per cent Q-o-Q in constant currency (CC), but margins to decline Q-o-Q 200 bps as Q3 benefited from product seasonality.

Key focus area will be the company’s guidance, which could be 6-8 per cent due to better exit rate for financial year 2024 (FY24). Furthermore, the outlook on specific deal ramp-downs in the first quarter will be critical.

Therefore, HSBC expects HCLTech to post $revenue at 3,473 million, earnings before interest, taxes (EBIT) at Rs 5,098.1 crore, EBIT margin at 17.7 per cent, and net profit at Rs 4060.2 crore

Nomura

Those at Nomura expect CC growth of 0.2 per cent sequentially, which includes one month revenue contribution from the Verizon deal. This would be partly negated by a seasonally weak quarter in product business.

“We expect 110 bp margin contraction Q-o-Q driven by a seasonally weak quarter in product business,” it said in a note.

Key factors to watch include commentary on cost takeout projects, banking vertical and outlook on client CY24 discretionary spend.

Nomura expects HCLTech to report $ revenue of $3,235 million and EBIT margin to come in at 18.2 per cent

Axis Securities

Analysts at Axis Securities expect HCL Tech to report a revenue growth of 0.6 per cent Q-o-Q in rupee terms while delivering an operating margin (OPM) contraction of 39 bps. 

Key factors, analysts believe would be deal pipeline, pricing scenario, and outlook on growth, operating margins and  products and platforms (P&P) business.

Axis Securities expects HCLTech to post revenue of Rs 28,623 crore, profit of Rs 4,290 crore, EBIT at Rs 5,538 crore and EBIT margin at 19.3 per cent.

Phillip Capital

Key factors to watch out for will be the financial year 2025 (FY25) guidance, outlook on ERD/products business, deal total contract value (TCVs) & pipeline, discretionary spending outlook and attrition, said Philip Capital in a note.

The brokerage expects constant currency (CC) revenue growth of 0.4 per cent. It further expects IT services to grow by 3 per cent Q-oQ, helped by 1 month impact of Verizon deal, 

Meanwhile, engineering and research and development (ER&D) to grow at 2.5 per cent Q-o-Q and P&P to decline 15 per cent Q-oQ, due to seasonality.

Margins, however, are expected to decline 150 bps sequentially due to P&P seasonality, partial wage hikes and Verizon deal transition impact

“We expect HCL to guide 6-8 per cent overall CC growth and 18-19 per cent on EBIT margins for FY25,” the brokerage said.

Sharekhan 

HCLTech is expected to report sequential revenue growth of 0.2 per cent in CC terms as incremental revenues from telecom contract and deal ramp ups may be offset by seasonal weakness in products. “EBIT margin to decline approximately 50 bps sequentially largely due to decline in products business,” analysts at Sharekhan added.

First Published: Apr 25 2024 | 3:40 PM IST