The company’s net profit on an adjusted basis is expected to grow between 1.2% and 8.2%, the estimates revealed.
The estimates are from five brokerages viz. Nomura, HDFC Securities, Elara Capital, JM Financial and Prabhudas Lilladher.
On the revenue front, HDFC Securities remains most conservative among its peers while JM Financial is the most bullish. As for profit after tax (PAT), Elara takes a more conservative position while HDFC Securities, most upbeat among its peers.
There is a consensus view that HCL will likely post strongest growth among the tier-1 companies.
Apart from the company’s revenue and PAT numbers, Street will also look at HCL’s commentary on the outlook. The tonality of discretionary demand environment and budget indicators for CY25 could be crucial indicators. Deal activity and pipeline particularly after the US election will also be an important indicator.The company will announce its quarterly earnings on Monday, January 13, 2025.
Here’s what top brokerages recommended:
Nomura
In large caps, HCL Tech is expected to post the strongest growth. Japanese brokerage Nomura pegs a 5.2% YoY and 3.7% QoQ growth in FY25 revenue at Rs 29,916 crore while estimating EBIT margin at 19.5%. This is likely to be a 20 bps YoY fall while a 90 bps QoQ uptick driven by seasonally strong software business.
Nomura expects 3.5% QoQ revenue growth in cc terms led by seasonally strong quarter for software business. The core services could grow 1.5% QoQ. On the deals front, a range of $2-2.5 billion is seen.
Key things to watch out for are commentary on cost takeout projects, banking vertical, demand revival in developed markets and outlook on client discretionary spend.
HDFC Securities
HDFC Securities has estimated revenue growth at 4.3% YoY and 5.8% QoQ to Rs 30,091 crore. The adjusted profit after tax (PAT) could go up by 8.2% YoY and 5.3%, sequentially to Rs 4,580 crore.
Company’s Earnings Before Interest and Taxes (EBIT) may increase by 9.1% YoY and 4.2% QoQ to Rs 5,852 crore. Meanwhile, EBIT margin could go up by 87 bps on a YoY basis while declining by 29 bps QoQ to 19.4%.
Echoing a similar sentiment HDFC Securities said that HCLT will likely lead growth and margin improvement in the tier-1 IT pack supported by software business seasonality in Q3. HCLT is expected to post a 4.1% QoQ CC revenue gain.
HCL Technologies is likely to revise its growth guidance upwards while margin guidance should remain unchanged for the company, this brokerage said.
Among key monitorables are the company’s commentary and tonality of discretionary demand environment and budget indicators for CY25. Deal activity and pipeline particularly after the US election will also be an important indicator. Moreover, Q3 furlough impact and GCC dynamics in deals versus the competition will also be a factor.
Outlook on industry verticals of manufacturing and retail while progress on GenAI investments will also be important metrics. HDFC Sec has marginally raised EPS estimates for HCL Tech.
Elara Capital
Within the Elara IT universe, HCL Tech is expected to report a strong sequential dollar revenue growth in Q3FY25. Revenue growth for HCL Tech will be on the back of seasonally strong Products & Platform (P&P) business. “We expect HCLT to report a sequential growth of 3.3% in USD terms, led by its P&P business. Expect a 20% QoQ growth in P&P due to seasonality,” it said in a note.
For the reporting quarter, revenue could go up by 5.1% YoY and 3.6% QoQ at Rs 29,900 crore. The adjusted PAT is pegged at Rs 4,403 crore, which may see a 1.2% YoY growth while recording a 4% sequential rise.
EBIT Margin is seen around 19% in Q3FY25, which could decline 70 bps over Q3FY24 while rising by 50 bps over Q2FY25.
Elara has a ‘Sell’ rating on HCL stock.
JM Financial
JM sees a 6.8% and 5.3% YoY and QoQ uptick in HCL’s October-December quarter revenue at Rs 30,393 crore. The net profits in the reporting quarter may rise by 5.6% YoY and 8.5% QoQ to Rs 4,593 crore.
While EBIT could grow 3.5% YoY and 8.4% QoQ to Rs 5,811 crore, EBIT margin is expected around 19.1%, a YoY downfall of 60 bps while a 50 bps QoQ rise.
HCL’s growth should be stronger at 5.5% CC QoQ on specific factors such as software sales and inorganic.
“We estimate c.115 bps cross currency headwind for HCL. We have built USD 20mn contribution from one-month consolidation of CTG. We are building 1.5%/1.5%/25% QoQ growth in IT Services/ERS/ Product & Platform business in USD terms,” a note by this brokerage said.
Wage hike will be a key headwind, JM said.
Prabhudas Lilladher
Prabhudas has estimated Q3 revenue of HCL at Rs 30,200 which is a likely 6.2% YoY and 4.6% QoQ growth. PAT is expected at Rs 4,500 crore witnessing a likely jump of 4% YoY and 6.8 QoQ.
Meanwhile EBIT margin could be reported at 19.2%, a 50 bps likely decline and 60 bps QoQ growth. We expect 4.6% QoQ CC growth led by strong performance in its software business amid furloughs in its IT Services
business. We expect currency headwind of 80 bps QoQ,” JM said in its preview note.
“We expect deal wins in the similar range of $2-2.5 billion. We also expect HCLT to maintain its organic revenue and margin guidance,” JM said while recommending an ‘Accumulate’ rating.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
