IT major HCL Technologies is expected to post muted earnings for the first quarter of the current financial year 2023-24 (Q1FY24) amid weak seasonality in IT (Information Technology) services segment in any June quarter due to annual productivity benefits passed on to certain large customers. Analysts in a CNBC-TV18 poll expect HCL Tech to report a net profit of Rs 3,809 crore, a decline of 4.4 percent compared with the previous quarter.

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The outlook for the IT service revenue growth is seen better at two percent, while engineering and R&D (ER&D) services is seen weaker, say analysts.

The Noida-based IT company's revenue in dollar terms is expected to rise 0.9 percent sequentially for the three-month period ended June, and at 0.4-0.5 percent in constant currency terms.

HCL Tech's EBIT, or earnings before interest and tax, a key metric of profitability, is estimated to be at Rs 4817 crore for the quarter under review as against Rs 4836 crore in the previous March quarter. Meanwhile, margin is estimated at 17.9 percent for the April-June period, lower by 1.64 percent, compared with 18.2 percent reported in the previous quarter.

FY24 guidance seen unchanged

Analysts expect HCL Tech to maintain its growth guidance for FY24. Revenue growth guidance for the fiscal year ending March 2024 is seen at 6-8 percent, while services revenue growth guidance is seen at 6.5-8.5 percent.

Noida-based HCL Technologies has indicated that it will hire 15,000 freshers in FY24, down from 26,700 hired in FY23. The company's attrition was also down to 19.5 percent in the fourth quarter of fiscal FY23 versus 21.7 percent in third quarter of FY23.

For a change, HCL Tech will be releasing its results before Infosys. HCL Tech was the only company in the fourth quarter of previous fiscal FY23 whose numbers were not lower than estimates — constant currency (CC) revenue of 1.2 percent versus estimate of -1.5 percent).

HCL Tech shares were trading nearly 1 percent lower at Rs 1,114 apiece in Monday's afternoon deals. The stock fell 2.26 percent in the last one month, while it has risen 7.16 percent on a year-to-date basis. In the last one year, HCL Tech shares have rallied 18 percent.

Analysts at ICICI Securities have a 'Add' recommendation on the counter, with 9 percent potential upside given it is likely to be the fastest growing IT services company among its large cap peers in FY24E. "With the stock trading at 17.5 times FY25E, at a significant premium to its last 15-year average of 14.6 times, we see limited further re-rating potential in HCL Tech," the brokerage said.

First Published:Jul 11, 2023 2:16 PM IST