Wipro Vs HCL Tech: Which IT Firm Will Deliver Better Q2 Results On Wednesday?

Wipro Vs HCL Tech: Which IT Firm Will Deliver Better Q2 Results On Wednesday?

While HCL Tech expects to retain its FY23 guidance, Wipro may guide revenue growth of up to 3 percent in constant currency (CC) terms for the December quarter, analysts said.

Two IT majors Wipro and HCL Technologies (HCL Tech), whose shares have declined up to 43 per cent year-on-year, are set to report their September quarter results on Wednesday.

If one goes by analyst estimates, HCL Technologies’ year-over-year (YoY) numbers are likely to be better, be it on the basis of revenue, profitability or margins. Wipro, on the other hand, is seen reporting better top- and bottom-line growth sequentially.

While HCL Tech expects to retain its FY23 guidance, Wipro may guide revenue growth of up to 3 per cent in constant currency (CC) terms for the December quarter, analysts said.

Some brokerage firms expect HCL Tech to post 3-8 per cent year-on-year profit growth against Wipro’s marginal decline or flatish bottom line. On a quarter-on-quarter (QoQ) basis, Wipro is seen reporting double-digit growth in profit as against HCL Tech’s 3-6 per cent profit growth.

Sharekhan expects HCL Tech to post 3.1 per cent growth in profit at Rs 3,364 crore as compared to Rs 3,264 crore in the year-ago quarter. On a sequential basis, it sees profit growth at 2.5 per cent.

For Wipro, Sharekhan’s profit fell 3.7 per cent to Rs 2,822 crore from Rs 2,931 crore. Sequentially, Sharekhan sees a 10.1 per cent jump in profit for Wipro.

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For HCL Tech, analysts said EBIT margins for global IT services could improve by around 30 basis points QoQ in the September quarter despite salary hikes, reduction in pricing, sub-contracting costs, improved utilization and pyramid rationalization. Like thanks for the tailwinds. For Wipro, the quarter is seeing an expansion of 20 bps QoQ in EBIT margins, despite the incremental pay hike.

Revenue Growth (QoQ)

Edelweiss sees Wipro reporting dollar revenue growth of 2.2 per cent QoQ as against 1 per cent for HCL Tech. It sees a sequential CC revenue growth of 4 per cent for Wipro as against 3 per cent for HCL Tech.

In constant currency terms, Sharekhan expects Wipro to post 4 per cent QoQ growth in revenue, which includes 1.3 per cent inorganic growth due to the Rising acquisition. The same brokerage expects HCL Tech to report 2.9 per cent QoQ cc revenue growth.

Advice

ICICIDirect said it does not see a change in HCL Tech’s revenue guidance of 12-14 per cent and Ebit margin guidance of 18-20 per cent for FY23.

Wipro gives quarterly guidance. The IT major had guided for 3-5 per cent CC growth in Q2 for IT services. Like ICICIDirect, Sharekhan, Wipro is expected to report 4 per cent QoQ CC growth in revenue in IT services, meeting its quarterly guidance.

HDFC Institutional Equities expects Wipro to guide 1-3 per cent cc QoQ growth for the December quarter. Emkay Global, another brokerage firm, expects Wipro to guide 0-2 per cent CC QoQ revenue growth for the December quarter.

What should an investor track?

As for HCL Tech, Motilal Oswal Securities said any revision in the outlook on margins and P&P business in FY23 would be key monitorable. Motilal Oswal Securities said that for Wipro, management’s guidance for the December quarter and deal win will be an important watchdog.

Emkay Global said that key verticals such as BFSI, consumer, manufacturing, healthcare and E&U will see management commentary on demand trends. It added that the supply side challenges and steps taken to manage job losses and deal intakes and pipelines will also be closely monitored.

For HCL Tech, it said growth outlook for ER&D and products business, BFSI, demand outlook for key verticals like manufacturing and healthcare; Pricing environment, and talent supply and discard will follow.

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