Two IT majors Wipro and HCL Technologies (HCL Tech), whose shares have fallen up to 43 per cent year-to-date, are set to report their September quarter results on Wednesday.
If one goes by analyst projections, HCL Technologies is likely to report better year-on-year (YoY) numbers, be it on the basis of revenues, profitability or margins. Wipro, on the other hand, is seen reporting better top and bottom-line growth sequentially.
While HCL Tech is expected to keep its FY23 guidance intact, Wipro may guide for up to 3 per cent revenue growth for December quarter in constant currency (CC) terms, analysts said.
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Profitability
A few brokerages expect HCL Tech to report 3-8 per cent rise in year-on-year profit against Wipro’s marginal drop or flattish bottom line. On a quarter-on-quarter (QoQ) basis though, Wipro is seen reporting double digit growth in profit against HCL Tech’s 3-6 per cent profit growth.
Sharekhan expects HCL Tech to report a 3.1 per cent YoY rise in profit at Rs 3,364 crore compared with Rs 3,264 crore in the year-ago quarter. On sequential basis, it sees profit growth at 2.5 per cent.
For Wipro, Sharekhan sees profit falling 3.7 per cent YoY to Rs 2,822 crore from Rs 2,931 crore. Sequentially, Sharekhan sees profit jumping 10.1 per cent for Wipro.
Margin
For HCL Tech, analysts said EBIT margin for global IT services may improve by about 30 basis points QoQ, despite wage hike in September quarter, thanks to tailwinds such as pricing, moderation of subcontractor costs, utilisation improvement and pyramid rationalisation. For Wipro, EBIT margins is seen expanding 20 bps QoQ despite wage hike in the quarter.
Revenue growth (QoQ)
Edelweiss sees Wipro reporting a dollar revenue growth of 2.2 per cent QoQ against 1 per cent for HCL Tech. It sees sequential CC revenue growth of 4 per cent for Wipro against 3 per cent for HCL Tech.
In constant currency terms, Sharekhan expects Wipro to post 4 per cent QoQ growth in revenues, including an inorganic growth of 1.3 per cent due to Rizing acquisition. The same brokerage expects HCL Tech to report a 2.9 per cent QoQ CC revenue growth.
Guidance
ICICIdirect said it does not see HCL Tech changing its revenue guidance of 12-14 per cent and Ebit margin guidance of 18-20 per cent for FY23.
Wipro gives quarterly guidance. The IT major had guided for 3-5 per cent CC growth in Q2 for IT services. ICICIdirect, like Sharekhan, expects Wipro to report 4 per cent QoQ CC growth in revenues in IT services, meeting its quarterly guidance.
HDFC Institutional Equities expects Wipro to guide for 1-3 per cent CC QoQ growth for December quarter. Another brokerage Emkay Global expects Wipro to guide to 0-2 per cent CC QoQ revenue growth for December quarter.
What should investor track?
For HCL Tech, Motilal Oswal Securities said any revision in outlook on margin and the P&P business in FY23 will be key monitorables. For Wipro, the management’s guidance for the December quarter and deal wins will be a key monitorable, Motilal Oswal Securities said.
Emkay Global said management commentary on demand trends in key verticals like BFSI, consumer, manufacturing, healthcare, and E&U will be watched. Steps taken to manage supply side challenges and attrition and deal intake and pipeline would also be keenly watched, it said.
For HCL Tech, it said growth outlook for ER&D and the products business, demand outlook for major verticals like BFSI, manufacturing, and healthcare; pricing environment, and talent supply and attrition will be followed keenly.
