HCL Tech slips over 0.75% ahead of its Q2 results; key things to watch out for

HCL Tech Q2: Shares of HCL Technologies slipped as much as 0.78 per cent to Rs 1,235.95 apiece on the BSE on Thursday, October 12, reacting to mixed Q2 numbers by its peer Tata Consultancy Services (TCS). Besides, nervousness ahead of its September quarter results announcement, which will be released later in the day, also added pressure to the stock. 

According to Zee Business Research, the Noida-headquartered IT services company will report revenue of Rs 27,000 crore, up 2.7 per cent QoQ while revenue in US dollar terms is expected to rise 1.7 per cent QoQ to $325.5 crore. Revenue in constant currency (CC) terms is expected to rise 2.2 per cent QoQ. EBIT is pegged at Rs 4,725 crore, up 6.5 per cent QoQ while EBIT margin is expected to come in at 17.5 per cent against 16.9 per cent in the previous quarter. 

Profit after tax (PAT), or net profit, is expected to rise 7.5 per cent QoQ to Rs 3,800 crore. The company's IT Services vertical's revenue is expected to rise by 1.5 per cent, and ER&D (including ASAP) is likely to increase by 3 per cent. The P&P segment is expected to fall 5 per cent. The company's margin is expected to see a jump owing to the non-spending of wages and an increase in operating leverage.

Further, the company is expected to maintain FY24 revenue guidance of 6–8 per cent and 18-19 per cent of margin guidance.

All eyes will be on the ER&D/Products business and the outlook on the deal's total contract value (TCV).

JM Financial, in its research preview note, says, "We are not building any wage hike in this quarter and expect EBIT margins to improve by 27 bps QoQ to 17.2% as operational efficiency will likely be partially offset by lower ASAP margins."

It must be noted that HCL Tech completed the acquisition of German automotive engineering services company ASAP Group in September. On July 12, 2023, the Noida-headquartered IT services company announced that it had signed a definitive agreement to acquire a 100 per cent equity stake in ASAP Group, an automotive engineering services provider. The transaction is subject to relevant regulatory approvals and is expected to close in September 2023, the press release added.