After two quarters of steep erosion in profitability, HCL Technologies is likely to have seen some improvement in margins during the quarter ended September due to lower operating costs, subcontracting expenses, and better pricing, observed analysts. However, high attrition rate will remain a dampener and limit the expansion in margins.
The company’s earnings before interest and taxes (EBIT) margin is likely to expand 30-100 basis points (bps) sequentially from 17%. In the preceding two quarters, the company’s operating margin has contracted by 200 bps.
Despite such a steep erosion in the margin, HCL Technologies, after the June quarter earnings, had said it would be able to achieve at least the lower end of its guided margin range of 18-20% for 2022-23 (April-March).
The Street will be keen to know if the company is able to stand by its words when it releases Q2 earnings on Wednesday.
At 11.24 am, the scrip was trading 1.88% higher at Rs 956.20 over its last day’s closing price of Rs 939.60 apiece. The stock has fallen nearly 15% in the last six months and has dropped about 28% year-to-date.
On the other core metrics, HCL Technologies is expected to report 4% sequential growth in the consolidated revenue for the quarter to Rs 24,382 crore, the average of estimates by five brokerage firms has revealed.
The consolidated net profit is also expected to rise 4% quarter on quarter to Rs 3,418 crores, the average of five estimates showed.
On a year-on-year basis, the top line is likely to have grown 18%, and the bottom line 5%.
