HCL Tech, part of India's $100 billion outsourcing industry, will report earnings for the October to December quarter on Thursday. A strong set of numbers from the Noida-based company will add to the bullish sentiments around tech stocks that have got a leg up in the aftermath of Infosys and TCS results.
Tech stocks have seen sharp gains as Infosys unexpectedly raised its revenue forecast for the current fiscal on Friday. TCS' third quarter profits were also ahead of analyst estimates.
HCL Tech has been a favourite among IT analysts because India's fourth largest software services exporter has reported a string of stellar performances in the last few quarters.
HCL Tech is expected to report Rs 6,236 crore in sales, up 2.3 per cent from Rs 6,091 crore in the September quarter. U.S. dollar sales are seen rising 3 per cent sequentially to $1148 million. The jump is likely on the back of infrastructure services and ramp-up of recently signed large deals, Kotak Securities said.
Net profit may fall 4 per cent sequentially to Rs 825 crore against Rs 862 crore in the previous quarter. Operating margins are likely to decline to 17.6 per cent against 19.4 per cent quarter-on-quarter on the back of wage hikes. Earnings before interest tax amortization and depreciation (EBITDA) may come down to 20.4 per cent against 22.2 per cent (qoq).
Kotak said increased investments towards sales and marketing and wage hikes may affect margins.
Dividend payout ratio, quantum of large deal signings and operating margins would be closely tracked.
How to trade the stock:
HCL Tech shares are up 7 per cent over the last week so some profit taking may take place post the earnings announcement.
Hitesh Shah, IT analyst at IDFC Securities told NDTV Profit that HCL Tech has little upside in terms of stock appreciation.
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