© Sunil Matkar HCL Technologies Q2 Preview | Deal wins, FY22 revenue and margin guidance key aspects to watch out for
IT services firm HCL Technologies' share price gained more than a percent on October 13, ahead of September 2021 quarter earnings, and already registered 29 percent gains since the start of the June quarter. So the most crucial aspect to watch out for would be whether the quarterly earnings will help the stock rally further or not.
Overall, experts expect good quarterly earnings on October 14, with likely robust deal wins and stable margin, driven by growth across verticals, and more than 12 percent revenue growth guidance for the financial year FY22 compared to FY21.
Revenue growth in terms of constant currency could be in the range of 5-5.5 percent and dollar revenue around 4.5-5 percent compared to September 2020 quarter, driven by ramp-up of large deals, and growth across verticals.
"We expect robust revenue growth of 5.5 percent in constant currency QoQ driven by ramp-up of large deals won in Q4FY21. We expect growth to pick up post subdued growth in last two quarters," says Prabhudas Lilladher, which sees 3.6 percent sequential growth in profit and 4.9 percent growth in rupee revenue.
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Kotak Institutional Equities also said after two weak quarters, it expects revenue growth to pick up on a sequential basis. "Revenue growth will be powered by large deals won in March 2021 quarter. The uptick in the products business will also help. We forecast sequential revenue growth of 5 percent in IT services, 4.5 percent in ERD (Engineering and R&D Services) and 1.9 percent in products in USD terms."
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Experts largely see HCL Technologies reporting constant currency revenue growth guidance at more than 12 percent for FY22 over FY21 on the back of expected large deal wins, but the operating margin forecast may remain unchanged.
Kotak believes that HCL Technologies may be more specific on guidance and indicates 12 percent growth in constant currency for FY22, and expects the operating margin guidance band to stay unchanged.
Prabhudas Lilladher expects HCL to give a revenue guidance number of 12-14 percent YoY in constant currency compared to double-digit guidance commentary earlier.
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"Deal activity is reasonably strong. HCL has announced nine deals in the past three months. We expect robust total contract value (new deals) of $2.5 billion, higher than the number announced in the June 2021 quarter but lower than $3.1 billion announced in the March 2021 quarter," said Kotak.
Key Things To Watch Out For
Investors are expected to focus on full-year revenue guidance, deal wins and deal pipeline, pricing irrationality in large deals, attrition rates, timeline of investments in geographical presence and their impact on revenue growth, capital allocation, growth outlook for ER&D and products business, and demand outlook for major verticals like BFSI, Manufacturing, and Healthcare, as per Kotak, Prabhudas Lilladher and Emkay Research.
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