HCL Tech: Betters guidance, but pain points show up

Rajalakshmi Nirmal |BL Research Bureau | | Updated on: Jan 22, 2018

HCL Technologies has reported a better than guided performance in the September quarter. Dollar revenues were up by 0.5 per cent sequentially.

The company had issued a profit warning earlier indicating that dollar revenues may see a sequential drop of 80 basis points in the September quarter. However, with markets expecting at least 0.7 per cent increase in dollar revenue, the numbers from the company today were a disappointment.

However, the stock of HCL Technologies, which opened in the red, is currently trading up by 0.5 per cent at ₹846.

The stock has been battered over the last few weeks after it guided for lower earnings growth. It was trading at ₹980 before the company issued the warning.

The company expected lacklustre revenue growth in the quarter due to adverse cross-currency movements in the guidance issued on October 1. The results reveal other problems too.

The US markets reported a tepid 0.7 per cent sequential growth (constant currency) versus 5.1 per cent growth in the June quarter. In services lines, pain was seen in the IMS space. From a 5.2 per cent growth in the June quarter, growth slid to 0.9 per cent in the September quarter.

The company had indicated on October 1 that it was facing some problem with a specific client and will be setting aside $20 million during the September quarter to write down costs with respect to the project.

So, the operating profit margins shrunk. EBIT margins were down 92 basis points from the June quarter to 20.56 per cent now. Utilisation saw a marginal improvement to 83.6 per cent from 83.5 per cent in the June quarter.

Published on October 19, 2015
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