HCL Technologies share price in focus ahead of Q1 results; check details

HCL Technologies shares traded choppy on Wednesday's trading session ahead of the company's Q1FY23 (April-June) quarter results. Analysts anticipate that the company would report weak financial results for the April–June quarter of the current fiscal year (Q1FY24), mostly as a result of a downturn in the market environment and the impact of cancelled ER&D (engineering research and development) projects. HCL Tech share opened at ₹1,117.05 apiece on BSE.

Although the company's revenue may increase annually, sequentially it may remain constant or even decline, but margins may stay stable.

Kotak Institutional Equities forecasts that HCL Tech's adjusted PAT will increase by 18.2% YoY and that its revenue will increase by 14.9% YoY.

"Our forecast of one per cent organic constant currency (CC) revenue growth rate is based on—(1) 3 per cent QoQ (quarter-on-quarter) growth in IT services courtesy of ramp-up in mega-deals, (2) 2.5 per cent QoQ revenue decline in engineering research and development and (3) 4.1 QoQ decline in the products segment," said Kotak.

Although compensated by a ramp-up in mega-deals, discretionary IT spending has decreased. QoQ, EBIT margin will be constant. Improvements to operations will lessen the impact of the ramp-up of huge deals, according to Kotak.

The brokerage firm anticipates that HCL Tech would adhere to its FY2024 revenue growth and EBIT margin targets of 6–8% and 18%, respectively.

Brokerage firm stated that in addition to the numbers, management commentary on the near-term demand situation and ER&D will be the most important monitorable.

On the technical front, as per trendlyne data, the stock price rose 17.9% and outperformed its sector by 8.4% in the past year.

“TCS and HCL Tech officially set-afire the ceremonial starters pistol for the Q1 earning season. Investors will spy with one big eye on the overall demand scenario in the tech space. The June quarter earnings are seen to be weaker than expected amid uncertain and global environment and a slowdown in discretionary spending by clients.

Technically, looks weak on charts TCS can test below 3200 and Infosys can test below 1280 while for HCL Tech it looks weaker results are already discounted in the price action and from here it can test below 1100 ahead of results expectations. We continue to remain neutral to negative on IT stocks for Q1 results,” said Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities.

HCL Tech Q1 results preview: Five things to watch out for in the earnings today