HCLTech Share Price Dips After One-Time Hit On Q3 Net Profit
Shares of HCL Technologies Ltd. are in focus today, after the company’s net profit fell sequentially in the third quarter of the current financial year due to a one-time impact of new labour codes. The stock is trading over 1.6% lower, at Rs 1,639.90 apiece. It has also fallen nearly 18% in the past 12 months.
Of the 47 analysts, tracked by Bloomberg, who have coverage on this stock, 23 analysts have a ‘buy’ call, 16 have a ‘hold’ view, and eight have a ‘sell’ call on the stock. This indicates that the majority of analysts still have a positive outlook on the company’s future performance.
HCLTech Q3 Results: Key Highlights
The IT giant reported a consolidated bottom-line of Rs 4,076 crore in the October-December period, compared to Rs 4,235 crore in the preceding quarter, according to an exchange filing on Monday.
The key highlights of HCLTech’s Q3 results are:
- Revenue up 6% at Rs 33,872 crore versus Rs 31,942 crore (Estimate of Rs 33,201 crore).
- Net profit down 3.8% at Rs 4,076 crore versus Rs 4,235 crore (Estimate of Rs 4,702 crore).
- EBIT up 14.2% at Rs 6,285 crore versus Rs 5,502 crore (Estimate of Rs 6,054 crore).
- EBIT margin at 18.6% versus 17.2% (Estimate of 18.2%).
The operating margin included a 81 basis points impact of restructuring cost. The implementation of the New Labour Codes led to a one-time increase in employee benefit provisions, estimated at Rs 956 crore, according to the statement.
Growth Drivers: Advanced Artificial Intelligence and Order Book Expansion
HCTech reported a nearly 20% quarter-on-quarter growth in revenue from its advanced artificial intelligence segment, reaching $146 million in constant currency. This indicates that the company is making significant strides in the AI space, which is a key growth driver for the IT sector.
The company’s order book expanded by 17% sequentially and 43% year-on-year, totaling $3 billion in the third quarter. This is a positive sign, as it indicates that the company has a strong pipeline of future projects and revenue streams.
Business Unit Performance: HCLSoftware and IT Services
Among business units, HCLSoftware delivered the strongest performance with a 28.1% rise, while the IT services segment recorded a 1.5% increase on a QoQ constant currency basis. This indicates that the company’s software business is performing well, and the IT services segment is also showing signs of growth.
Revised Guidance: Full-Year Revenue Growth and EBIT Margin
HCLTech has revised its full-year revenue growth guidance in constant currency terms to a narrower range of 4%–4.5%, compared to the earlier projection of 3%–5%. The company has also upgraded its services revenue growth outlook to 4.75%–5.25%, up from the previous estimate of 4%–5%.
Meanwhile, the EBIT margin guidance remains unchanged at 17%–18%, excluding the one-time impact of the new labour codes. This indicates that the company is confident about its ability to maintain its profitability margins, despite the one-time hit from the new labour codes.
For investors looking to invest in HCLTech, it’s essential to consider the company’s long-term growth prospects, rather than just focusing on the short-term volatility in the stock price. The company’s strong performance in the AI space, order book expansion, and revised guidance indicate that it has a solid foundation for future growth.
However, investors should also be aware of the potential risks and challenges facing the company, including the impact of the new labour codes and the competitive landscape of the IT sector. By doing their research and staying up to date with market news, investors can make informed decisions about their investments in HCLTech and other IT stocks.
Conclusion
In conclusion, HCLTech’s Q3 results were impacted by a one-time hit from the new labour codes, but the company’s long-term growth prospects remain intact. With a strong performance in the AI space, order book expansion, and revised guidance, HCLTech is well-positioned for future growth. Investors should consider the company’s fundamentals and growth prospects, rather than just focusing on the short-term volatility in the stock price.
