HCL Tech stock plummeted by 9% following a slight increase in guidance, suggesting a potentially weaker performance in the fourth quarter.
HCL Tech stock: Shares of India’s third-largest IT company, HCL Technologies, experienced a significant drop of over 9 percent on January 14, following the release of its Q3 financial results. While the company’s earnings were generally in line with expectations, a slight upgrade in guidance indicated a potentially weaker performance in Q4, leading to a negative market sentiment.
As of 09:36 am, shares of HCL Technologies were trading at Rs 1,804.65 on the National Stock Exchange (NSE).
HCL Technologies has revised its revenue growth forecast for the fiscal year 2025, increasing the lower end by 100 basis points in constant currency (CC) terms. CEO C Vijayakumar attributed this adjustment to the planned reduction of a significant telecom deal in Q4 and delays in the implementation of certain discretionary projects. The updated revenue growth guidance now ranges from 4.5 to 5 percent, compared to the previous range of 3.5 to 5 percent.
Despite the positive revision, analysts from various brokerages noted that the updated guidance implied weaker growth expectations for Q4, which was disappointing news, particularly as the company had been observing an uptick in discretionary demand.
The brokerage firm Jefferies has pointed out that HCL Technologies’ revised growth guidance indicates a weak Q4 exit, despite positive comments on the conversion of Total Contract Value (TCV) to revenue and discretionary spending. Stay updated on all market developments by following our market blog.
While management attributed the subdued Q4 performance to planned contractual reductions, MOFSL expressed concerns about the slower ramp-up of discretionary deals in the January-March period, especially in a market where short-cycle deals are becoming more popular.
In terms of quarterly earnings, HCL Technologies’ consolidated net profit for the third quarter increased by 8.4 percent sequentially to Rs 4,591 crore, with revenue also rising by 3.6 percent to Rs 29,890 crore. A Moneycontrol survey of nine brokerages had estimated HCL Technologies’ revenue at Rs 30,135 crore and consolidated net profit at Rs 4,596 crore in Q3, so the actual figures fell slightly below expectations. EBIT margins also improved by 93 basis points sequentially to 19.5 percent, surpassing HCL Technologies’ guidance range. Despite the revision in revenue guidance, HCL Technologies maintained its EBIT margin guidance at 18-19 percent for the full year.
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