On BSE, HCL Tech shares have closed at ₹938.60 apiece down by 2.47%. The company's market cap is around ₹2,54,704.61 crore.
HCL Tech has already announced consideration of the payment of the third interim dividend for the financial year FY23 on 12th October. The company has fixed October 20 as the record date to determine the eligible shareholders for the benefit of 3rd interim dividend.
For the current fiscal, HCL Tech paid a first interim dividend of ₹18 per share and a second interim dividend of ₹10 per equity share. As of March 30, 2022, HCL Tech paid a total dividend of ₹42 per equity share aggregating up to a massive ₹11,392 crore. The total dividend payout percentage was at 2,100%.
During April to June 2022 quarter, the IT services provider posted a consolidated net profit of ₹3,283 crore down by 8.6% qoq but slightly up 2.4% on a year-on-year basis. Consolidated revenue came in at ₹23,464 crore higher by 16.9% yoy and 3.8% qoq. The constant currency revenue growth stood at 2.7% qoq and 15.6% yoy in the Q1 of this fiscal. EBITDA margin was at 21.2%, while EBIT margin came in at 17% in the first quarter of FY23.
What to expect from HCL Tech's Q2 earnings?
In their Q2FY23 preview report, Sameer Pardikar and Sujay Chavan analysts at ICICI Direct said, "HCL Tech is expected to report weak numbers on seasonally weak numbers for P&P business which will overshadow decent performance in IT & ER&D business. Company’s IT services to report 3.5% QoQ growth in CC given continued strong deal momentum, while Dollar revenue is expected to grow by 2% QoQ factoring 150bps cross currency headwinds. In dollar terms; ER&D is expected to grow by 2.5% QoQ while P&P business is expected to decline by 10% QoQ. At the company level, it is expected to post 1.2% QoQ growth in USD terms."
In rupee terms, the analysts note said, "we expect the company to report 4.1% QoQ growth aided by rupee depreciation. EBIT margins for the quarter are expected to grow by 20 bps QoQ despite wage hike in the quarter as well as planned on boarding of 10,000 freshers in the quarter,to be mitigated by pricing benefits as well as moderation of sub-contractor costs . PAT is expected to improve by 7.5% QoQ."
Any change in revenue growth guidance of 12-14% in constant current for FY23E and 18-20% EBIT margin band will be keenly watched.
ICICI Direct analysts expect HCL Tech to post revenue of ₹24,428.3 crore up by 18.3% yoy and 4.1% qoq, while EBITDA is factored at ₹5,178.8 crore higher by 7% yoy and 4.1% qoq. PAT has projected at ₹3,464.3 crore up by 6.1% yoy and 5.5% qoq.
Meanwhile, in their report, Sharekhan said, "HCL Tech is expected to report a decent 2.9% q-o-q CC revenue growth supported by 3.1% q-o-q growth in lT and business services and we see a cross-currency impact of 220 bps," adding, "EBIT margin is expected to increase by 41 bps q-o-q as tailwinds of operating leverage, INR depreciation to get partially offset by supply-side pressures and wage hikes."
Also, Anjali Verma Research Analyst, and Ravi Kumar Research Associate at PhillipCapital said, "We expect CC revenue growth of +4.0% (+2.0% in USD). Growth to be driven by services (IT services & ER&D) while P&P will remain muted. Margins are expected to expand moderately (+40bps) as HCL will have salary hikes over Q2/Q3, offset by growth and operational efficiencies. We expect HCL to retain its growth margins guidance."
Also, Mukul Garg and Raj Prakash Bhanushali Research analysts at Motilal Oswal analysts in their report, stated that the company's 2QFY23E CC growth will be good and the management commentary should remain positive. The services business should see good growth. Further, margins should improve in 2QFY23E despite wage hikes.
Motilal and Sharekhan analysts have given a buy rating on HCL Tech with a target price of ₹1,170 and ₹1,140 apiece respectively. On the other hand, ICICI Direct analysts have set a 'Hold' recommendation with a target price of ₹1,050 apiece.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
