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HCL Technologies Ltd. is poised to unveil its Q3 FY25 financial results, generating significant anticipation within the investment community. The announcement follows the release of Tata Consultancy Services (TCS) Q3 results, which showcased impressive earnings and deal wins, sparking a rally in IT sector stocks and highlighting the sector's overall health. Market analysts widely predict HCL Tech will mirror this positive trend, showcasing robust growth driven by its software business and the recent acquisition of the Communications Technology Group (CTG). This acquisition, along with the inherent seasonality of its software segment, positions HCL Tech to potentially outperform other Tier I IT companies in terms of sequential constant currency (CC) growth, with projections ranging from 4.6% to 5.5%. While this strong growth is anticipated, factors like wage hikes and potential furloughs are expected to exert some pressure on profit margins, tempering the overall impact on profitability.
Financial projections for HCL Tech's Q3 results vary slightly depending on the analyst firm, yet a consensus of robust performance emerges. Prabhudas Lilladher estimates a 3.9% year-on-year (YoY) increase in net profit, reaching Rs 4,520 crore, compared to Rs 4,350 crore in the same period last year. JM Financial offers a more optimistic projection, anticipating an 8.5% YoY rise to Rs 4,593.50 crore. Nuvama, presenting the most bullish forecast, projects a substantial 13.1% YoY increase in net profit, reaching Rs 4,790 crore. Similarly, revenue projections vary but point toward solid YoY growth, ranging from 4.3% to 6%. Estimates for total revenue fall within the Rs 30,110 crore to Rs 30,393 crore range. Earnings before interest and taxes (EBIT) margins are expected to contract slightly on a year-on-year basis but show sequential improvement, reflecting the positive influence of the software business on overall profitability. Analysts like Prabhudas Lilladher and JM Financial predict EBIT margins around 19.2% and 19.1%, respectively.
The contribution from HCL Tech's various business segments is expected to be diverse, contributing to the overall strong results. The IT services and software businesses are projected to be key drivers of growth. JM Financial's analysts have incorporated an estimated $20 million contribution from the CTG consolidation into their projections. They also forecast a 1.5% quarter-on-quarter growth in IT services, engineering, and R&D (ERS), and product and platform businesses. However, certain segments might present challenges. The engineering and manufacturing segments, particularly those associated with the German automotive sector, may experience some softness due to ongoing industry headwinds. Conversely, the high-tech segment is anticipated to show signs of recovery in discretionary spending, presenting long-term growth potential for HCL Tech. This balanced perspective highlights both opportunities and potential challenges in the company's diverse portfolio.
Brokerages express cautious optimism, with several predicting a potential upgrade to HCL Tech's FY25 revenue growth guidance. Nuvama, for example, anticipates an upward revision to 4-5% CC YoY from the previous 3.5-5%. The projected margin expansion of 50 basis points (bps) sequentially reinforces this positive outlook. This expansion is attributed to a robust performance in the software business, complemented by operating leverage, despite the countervailing pressures of wage hikes and furloughs. Beyond the core financial metrics, HCL Tech's management is anticipated to announce a dividend alongside the quarterly results. A subsequent audio conference call with senior leadership is scheduled for 7:30 PM, offering investors an opportunity to delve deeper into the financial performance and future strategy of the company. This comprehensive disclosure strategy underscores the importance of investor relations and the transparency of HCL Tech's financial communications.
Source: HCL Tech to announce Q3 results today: What to expect from the IT giant