India’s largest IT services company TCS and another IT giant HCL Technologies are scheduled to announce their financial results on Wednesday after market hours. According to brokerage houses, TCS’ profit is likely to rise 16 per cent YoY to Rs 11,017 crore in April-June 2023 but sequentially it may fall 3.3 per cent. However, HCL Tech is expected to post a net profit of Rs 3,812 crore, which is up 16 per cent YoY and down 4.3 per cent QoQ.
According to a report by J M Financial on the IT sector performance in Q1FY24, “Large banks’ IT budgets remain constrained, dampening growth prospects. We expect large-cap IT services players under coverage to report -1.7 per cent to 0.6 per cent CC QoQ growth.”
Q1FY24 Result Preview: Tata Consultancy Services
According to a report by Jefferies, constant currency revenue is expected to be flat impacted by project ramp-downs, delayed ramp-ups and slower sales cycles. It projects a decline of 150 bps QoQ in EBIT margin. Deal bookings, however, will be strong due to large/mega deals announced recently. The company could also announce a buyback this quarter.
According to a report by Motilal Oswal Financial Services, EBIT margin is expected to decline 140 bps QoQ even as discretionary spending continues to remain under pressure. The deal pipeline though, should remain resilient.
As per a report by IDBI Capital, a cross-currency tailwind of 60 bps is expected. However, an increase in wages and a soft demand environment will impact the margins. EBIT margin is expected to taper by 106 bps QoQ to 23.4 per cent.
Q1FY24 Result Preview: HCL Tech
According to brokerages, HCL Tech’s Q1FY24 net sales are likely to increase by just 0.6 per cent QoQ to Rs 26,756 crore, its net profit might fall 4.3 per cent QoQ yo Rs 3,812 crore.
Kotak Insitutional Equities said, “Our forecast of 1 per cent organic CC revenue growth rate is based on 3 cent QoQ growth in IT services courtesy of ramp-up in mega-deals, 2.5 per cent QoQ revenue decline in ERD and 4.1 QoQ drop in the products segment. The ERD segment will have to bear full quarter impact of programs that came to an end or were cancelled.”
The brokerage house sees reported bottomline for HCL Tech rise 18.2 per cent YoY to Rs 3,886.70 crore on 14.9 per cent YoY jump in sales at Rs 26,963.20 crore.
Motilal Oswal said revenue growth is expected to remain muted on a quarter-on-quarter basis, on account of the impact of productivity gains, slowdown in small deals, and the impact of cancellations in ER&D. IDBI Capital pegs sequential revenue growth of 0.25 per cent in CC terms. Softness in growth would mainly be due to one off in ER&D business and seasonally weak product revenues, it said.
Forecasting a profit growth of 20.8 per cent YoY at Rs 3,965 crore and sales 14.9 per cent YoY at Rs 26,948 crore, Emkay Global in its report said, “We are building in 1.3 per cent QoQ dollar revenue growth after factoring in 50bps cross-currency tailwinds. Sequential revenue growth is expected to be driven by software due to seasonality, while services growth is expected to be driven by IT and business services and ER&D to remain soft”.
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