HCL Tech's Q3 revenue to be driven by robust growth in the P-;P segment, large deals; Broader earnings seen sequentially strong

14 Jan 2022 , 10:25 AM

HCL Technologies stock was under pressure on Friday’s trading session ahead of its financial performance for the quarter ending December 2021 (Q3FY22) period. The stock was among the top laggards today on the exchanges.

In Q3FY22, HCL Tech is seen to garner strong numbers in its financial books on a sequential basis. Double-digit growth is expected in P&P (Products & Platforms) segment as it could benefit from deal closures that were delayed in the preceding quarter. EBIT margins are seen to expand due to higher offshoring, rupee depreciation, robust revenues from the P&P segment.

Healthy net new deals won in H1, the strong outlook in IT and ER&D services and seasonality in Products & Platforms are expected to drive revenue growth. Deal wins for the quarter should also remain strong.

The company is seen to post a constant currency revenue growth of 4.5% sequentially in the quarter under review.

Key things to watch out for in HCL results are – organic growth outlook within IT services, outline on strategic changes for Products & Platforms post-management change, attrition trends and management commentary.

In September 2021 quarter, HCL Tech reported 11.08% yoy growth in total revenues on a consolidated basis at Rs20,655cr. HCL Tech witness robust growth yoy in constant currency terms of above 13% in services revenues while the products and platforms business saw a contraction of -5.5% in the top line.

Further, in Q2FY22, the company’s net profits were up 3.69% on a yoy basis at Rs3,259cr while on a sequential basis, the profits were up by 1.68%. In terms of guidance, HCL Tech has guided for double-digit revenue growth in FY22 and operating margins have been projected in the 19% to 21% range. As of September 2021, its OPM at 23.5% was at par with Infosys and a tad below TCS.

On Sensex, at around 10.21 am, HCL Tech was trading at Rs1294.95 per piece down by Rs38.30 or 2.9%. The stock has touched an intraday high and low of Rs1328.10 per piece and Rs1292.80 per piece respectively.