Here’s what to expect from HCL Tech earnings

HCL Technologies Q1FY21 earnings to be announced tomorrow July 17BCCL
  • HCL Technologies is set to announced its first-quarter results on Friday, July 17.
  • Analysts expect a sharp drop in revenue and profit.
  • They also forecast that its unlikely that HCL Technologies will issue an annual guidance.
After Tata Consultancy Services (TCS), Infosys and Wipro have already released there first-quarter earnings for 2020-21, HCL Technologies is set to announce its results on Friday, July 17.

As with Wipro and Infosys, whose share prices showed positive anticipation of the Q1 earnings — HCL Technologies stock also started to rise during afternoon trade to 2% higher than yesterday’s closing. Even though the increase is marginal, it’s the highest that the company’s stock has been valued over the past month.

HCL Technologies share price over the last one monthBSE/BI India

Savings from rupee value fall and work from home might not be enough
Like with the other Indian IT services companies, analysts expect positive headwinds in terms of margin expansion from the fall in the value of the rupee and more employees working from which has allowed companies to save on expenses. The depreciation of the rupee helps since most of the IT companies earn in dollars.
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However, it remains uncertain whether the savings will be enough to cover pricing pressures and a decline in utilisation.

Revenue and profit likely to be negatively affected by the coronavirus pandemic
Quarterly growth and profit turnover is likely to be in the red as pressures of the coronavirus pandemic continue. The main factor to watch out for will be the new deals that HCL Technologies in bringing on board and how many new clients it was able to rope in in order to keep its deal pipeline healthy.

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BrokerageExpected drop in revenue QoQ
Motilal Oswal-7.6%
Nirmal Bang-3.7%
ICICI Securities-8%
IDBI Securities-8.2%
Source: Brokerage preview reports

Even though Infosys issued annual guidance during its earnings calls, analysts believe it’s unlikely that HCL Technologies will follow suit.

“We expect the Product and Platforms business to show resilience while the IT services business is expected to soften,” said Nirmal Bang’s report. It, along with Motilal OswalOswals, added that a key vertical to watch will be engineering and R&D services since pure plays by other companies — like Cyient and LTTS — have not had the best outcome.

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Last quarter, HCL Technologies announced that 50% of its employees will continue to work from home even after the lockdown. Investors will be on the lookout for any updates for management commentary around making any permanent changes to the operating model.

SEE ALSO:
Infosys gives annual guidance of up to 2% growth this year as profit plummets by 4.8% and revenue dips 2% in Q1

Infosys is still on the fence when it comes to making work from home a permanent change

TCS and Infosys to face least impact — Indian IT companies likely to report sharp decline in revenue during first quarter

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