HCLTECH Result Ahead On 12 July 2022

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IT major HCL Technologies (HCLT), which is due to report its April-June 2022 financial results on Tuesday (July 12), is expected to report sequential revenue growth of 2.9% on a constant currency basis for the quarter, despite strong revenue Growth will be offset by productivity commitments, while the brokerage firm's profit after tax (PAT) is expected to fall 7.9%. Revenue is expected to grow 1.4% sequentially in dollars (2.9% sequential at constant exchange rates) as strong revenue growth is offset by productivity commitments. It added that HCL Technologies could maintain its FY23 guidance of 12-14% currency-neutral revenue growth. Key ones to watch out for include: Details on new product business disclosures, FY23 revenue and margin outlook, Demand risk/outlook due to macro headwinds, Engineering Research & Development outlook, Product vertical growth forecasts and Platforms and Turnaround Progress, Mode 1 and Mode 3 Performance, Big Deal Wins and Pipeline. HCL Tech's subdued performance in a seasonally weak quarter. The company reports quarter-over-quarter growth of 1.4% in dollar terms on cross-currency headwinds of 60 basis points (basis points). Rupee earnings are expected to show revenue growth of 3.7% qoq. It expects its P&P business (products and platforms) to post a single-digit decline, while IT services and ER&D

services (engineering and R&D) to post modest quarterly growth of 2 to 2.5% on a constant currency basis. EBIT (earnings before interest and tax) margins for the quarter are expected to decrease 90 basis points sequentially due to an increase in retention costs as well as travel expenses. PAT is expected to decline 7.9% qoq. Investor interest this time will be any change in revenue growth forecast of 12-14% in CC for FY23E and 18-20% EBIT margin range. Across IT, in a declining demand environment, large companies that are strategic vendors to their customers and have better cost management skills will outperform. Accordingly, our top picks are Infosys and TCS. We are building in a gradual slowdown in IT demand and accordingly are cutting our FY23-25E USD revenue growth by 0-4.5% and margin estimates by 0-150 basis points. We are also raising our WACC assumptions to reflect the higher cost of equity. This results in our FY23-25E EPS cuts of 0-16% and TP cuts of 5.9-42.1%.