Q3 2024 Earnings Insights: Analyzing Performance and Expectations for HCL Tech and Wipro
As the Q3 results season for October to December kicks off, investors and market observers eagerly await the financial reports of major Indian companies. In this article, we will analyze the expectations for two prominent IT companies, HCL Tech and Wipro, as they prepare to disclose their Q3 results for the financial year 2023-24.
HCL Tech: Anticipated Performance
HCL Tech is set to declare its Q3 results today after 3:30 PM. Analysts have projected positive growth for the company in various aspects. According to Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, HCL Tech’s revenue is expected to rise by 5.25% on a quarter-on-quarter (QoQ) basis, reaching ₹28,075 crore. This showcases steady growth compared to the previous quarter’s ₹26,672 crore[^1^].
Revenue Growth and Operational Performance
The optimistic outlook extends to HCL Tech’s operational performance as well. There is an expectation of a robust 6.73% increase in operating profit on a QoQ basis, projecting it to reach ₹5,250 crore compared to the prior quarter’s ₹4,919 crore[^1^]. Moreover, analysts foresee a promising 7.5% QoQ increase in profit after tax, estimating a figure of ₹4,118 crore, as opposed to the previous ₹3,832 crore[^1^].
Factors Driving Growth
The projected growth in HCL Tech’s Q3 results can be attributed to several factors. Firstly, the ramp-up of the Verizon deal is expected to contribute significantly to the revenue growth[^1^]. Additionally, the acquisition of the ASAP Group is likely to make an additional positive impact for two months. Furthermore, the Products and Platform (P&P) business is expected to benefit from seasonal strength, contributing to improved EBIT margins[^1^].
Counterbalancing Factors
While HCL Tech is anticipated to experience growth, there are counterbalancing factors that could impact the company’s performance. Wage hikes, furloughs, and costs associated with large deal ramp-ups might have a slight negative effect on overall margins[^1^]. Additionally, analysts will be looking for updates on the recovery of Enterprise Resource Planning (ERP) demand after a sharp decline, as well as information on large deals won in previous quarters and the company’s acquisition strategy and capital allocation policy[^1^].
Wipro: Expectations and Outlook
Wipro, another major Indian IT company, is also set to declare its Q3 results for the financial year 2023-24 today. Analysts have provided insights into what can be expected from Wipro’s Q3 results.
Revenue Decline and Margins
Dhruv Mudaraddi, Research Analyst at StoxBox, projects a decline in Wipro’s Q3FY24 revenue in low single digits on a QoQ basis. This is primarily attributed to lower services income stemming from weakness in the BFSI (Banking, Financial Services, and Insurance) and Hi-tech verticals, along with challenges in the consulting business[^1^]. Margins in the services business are also expected to decline slightly due to a one-month wage hike and furloughs, although operational efficiencies are anticipated to offset some of these impacts[^1^]. Overall, EBIT margins are expected to dip marginally due to soft sales performance and the impact of wage hikes effective from December 1, 2023[^1^].
Factors Affecting Performance
The performance of Wipro’s Q3 results will depend on various factors. Analysts will be closely monitoring the size and nature of large deals in the quarter, margin levers, signs of stabilization in discretionary project ramp-downs, and the impact of attrition among senior leadership[^1^]. These factors will shed light on the fundamentals of Wipro’s stocks, allowing investors to make informed decisions regarding their portfolios.
Other Companies Declaring Q3 Results
Apart from HCL Tech and Wipro, several other companies are also scheduled to announce their Q3 results for the current fiscal period. These companies include HDFC Life, Anand Rathi, Just Dial, Tata Metaliks, JTL Industries, and more[^1^]. The performance of these companies will contribute to the overall assessment of the Indian market and its economic recovery.
Conclusion
As the Q3 results season unfolds, the financial performance of major Indian companies like HCL Tech and Wipro will be closely monitored by investors and market observers. While HCL Tech is expected to witness growth driven by factors such as the Verizon deal and the P&P business, Wipro might experience a decline in revenue due to challenges in certain verticals. The Q3 results of these companies, along with others in the market, will provide valuable insights into the current state of the Indian economy and help investors make informed decisions.