Informist, Friday, Apr 26, 2024

--Jan-Mar consol net profit 39.86 bln rupees
--Analysts saw HCLTech Jan-Mar consol net profit 40.85 bln rupees
--Jan-Mar consol revenue 284.99 bln rupees
--To pay 18 rupees a share interim dividend
--Jan-Mar consol PAT 39.86 bln rupees vs 43.50 bln rupees quarter ago
--Jan-Mar consol sales 284.99 bln rupees vs 284.46 bln rupees quarter ago
--FY24 consol net profit 157.02 bln rupees vs 148.51 bln rupees
--FY24 consol revenue 1.099 trln rupees vs 1.015 trln rupees
--See FY25 revenue growth 3-5% in constant currency
--See FY25 EBIT margin at 18-19%
--Jan-Mar revenue up 0.3% on quarter in constant currency terms
--Jan-Mar services revenue up 3% on quarter in constant currency
--Jan-Mar EBIT margin 17.6% vs 19.8% quarter ago
--Won new deals worth $2.3 bln in Jan-Mar vs $1.9 bln quarter ago
--Jan-Mar attrition 12.4% vs 12.8% quarter ago
--Adoption of AI to boost global technology spending
--As we look ahead, global enterprise tech spend will grow
--Headcount 227,481 as on Mar 31 vs 224,756 a quarter ago
--Jan-Mar HCLSoftware sales down 18.5% on quarter in constant currency
--Won 21 large deals Jan-Mar, 13 in services, 8 in software
--Added 2 clients in $100 mln and above category Jan-Mar
--Jan-Mar financial services revenue up 2.8% on quarter in constant currency
--Jan-Mar manufacturing revenue up 4.1% on quarter in constant currency
--FY25 services revenue growth seen 3-5% on year in constant currency
--FY24 EBIT margin up 4 bps at 18.2%
--FY24 sales up 5% in constant currency
--Won deals worth $9.76 bln in FY24, up 10% on year

--Deal pipeline in financial services remains robust
--Have balanced portfolio that can deliver in any market scenario
--Expect FY25 hiring to be along similar lines as FY24
--May look to add over 10,000 freshers in FY25
--Some shift to global delivery model may hit Apr-Jun sales
--Some seasonality factor may impact Apr-Jun revenue
--Have very strong business momentum in North America
--Increments, seasonality factors weighed on Jan-Mar margin
--SBI deal a big, transformational contract for HCLSoftware
--New wins include transformation, cost-savings deals
--Broader macroeconomic environment quite volatile
--Expect similar macro environment in FY25 as in FY24

--FY25 to be yr of consolidation in terms of overall demand
--Co's growth guidance assumes macros to remain challenging

--Expect Apr-Jun sales to fall 2%

By Apoorva Choubey

MUMBAI – HCL Technologies Ltd not only missed the Street's expectations for Jan-Mar earnings, but the company's sales growth guidance for the current financial year was also below that projected by several analysts. India's third-largest information technology company guided for sales growth of 3.0-5.0% for 2024-25 (Apr-Mar) in constant currency terms and an operating margin of 18.0-19.0% during the year.

Several analysts had expected the company's sales growth guidance to be in the range of 4-7%. The company's senior management explained that the conservative guidance was a reflection of the expected 2?ll in constant currency sales during Apr-Jun, which is anyway a seasonally weak quarter for the company. The June quarter is likely to see a higher-than-usual impact of offshoring of some contract dealings.

The guidance of 18-19% operating margin for the current financial year was along expected lines. The company reported a 5% rise in constant currency sales for 2023-24, which was within the guided range provided by the company. For the year gone by, HCLTech reported earnings before interest and tax margin of 18.2%, flat on year.

The company is confident of achieving 3-5% sales growth as its exit run-rate of new deal wins sets it up for reaching at least the lower end of the guidance, HCLTech said in a conference call with analysts. The base case assumption the company has considered while drafting the guidance is that the macroeconomic environment will remain volatile in 2024-25, similar to that seen during the year ended March.

For the year gone by, the company's consolidated net sales rose 8.3% to 1.099 trln rupees, while bottomline was 157.02 bln rupees, up 5.7%. The growth was supported by new deal wins worth $9.76 bln, which implies a growth of 10% compared to a year ago. This includes the $2.1-bln deal that the company had won from Verizon Business in August to provide managed network services for its global enterprise customers.

`

HCLTech is sure of its balanced portfolio of services being able to deliver strong growth in any market scenario. It believes the deal pipeline in financial services and strong business momentum in North America will drive growth, as these remain the largest spenders on technology as a category and geography, respectively.

The company noted that it expects to do better than the industry in these segments. The company said new contract wins include large transformation and cost-savings deals.

The deal that unit HCLSoftware won from State Bank of India, which was announced today, is an example of a digital transformation deal. HCLTech also expects the adoption of artificial intelligence to boost global technology spending, with enterprises looking to infuse AI into various areas of operations.

JAN-MAR EARNINGS

The company reported an 8.4?ll in its consolidated bottomline to 39.86 bln rupees during the March quarter, belying analysts' average estimate of 40.85 bln rupees. The strength in the services vertical was not enough to offset the revenue decline in the high-margin products and platforms business, which had witnessed a seasonal leg-up in Oct-Dec.

For Jan-Mar, HCLTech reported weaker-than-expected revenue of 284.99 bln rupees, up 0.2% on quarter. Analysts had expected the topline to be 285.9 bln rupees.

In constant currency terms though, the sequential revenue growth of 0.3% was in line with expectations. When compared year-on-year, the company's net sales for the March quarter rose 7.1% while the bottomline increased 0.1%.

The Jan-Mar revenue from the services vertical rose 3% on quarter in constant currency terms, along expected lines. The company's financial services revenue also increased 2.8% on quarter in constant currency terms, while that from the manufacturing segment inched 4.1% higher during Jan-Mar.

The services business, which includes IT, and engineering and research and development services, contributes around 90% to HCLTech's consolidated topline. The rest comes from HCLSoftware, which houses the software business, earlier called the products and platforms division. During the March quarter, the company's sales from HCLSoftware fell a higher-than-expected 18.5% sequentially, in constant currency terms.

HCLTech won deals worth $2.3 bln during the March quarter, higher than the $1.93 bln worth of deal wins it saw in Oct-Dec. The company said it won 21 large deals during Jan-Mar, 13 in the services vertical and eight in the software division. It also added 2 new clients in the $100 mln and above category during the reporting quarter.

For Jan-Mar, the company saw its operating margin contract by 220 basis points sequentially to 17.6%. Analysts had expected the profitability to fall 100-200 bps. Increments and seasonality factors weighed on the operating margin for the March quarter, the company said.

The company's employee headcount rose by 2,725 during the quarter to 227,481, defying a declining trend seen at most rival companies. The company expects its hiring plans to be similar in the current financial year, with addition of over 10,000 freshers expected.

Shares of HCLTech closed 2% lower today at 1,473.85 rupees on the National Stock Exchange. The company announced its earnings after market hours. The company today also declared an interim dividend of 18 rupees per share. End

US$1 = 83.34 rupees

Edited by Manisha Baxla

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.