HCL Tech Q3 Results Surpass Estimates; Profit Soars 13.5%, Margin Expands to 19.8%

Manoj Prasad

HCL Technologies (HCLT), one of India’s top IT services providers, beat analyst predictions to report a strong set of numbers for the third quarter of FY2024 on Friday.

Buoyed by broad-based growth across verticals and geographies alongside a massive expansion in margins, the results underscore HCLT’s industry-leading operational excellence.

HCLT’s net profit witnessed a 13.51% annual growth to Rs 4,351 crore against Rs 3,833 crore in the same quarter last year. This even surpassed Bloomberg analyst consensus estimate of Rs 4,124 crore.

Robust profit expansion was powered by a 6.7% YoY revenue growth to Rs 28,446 crore that too exceeded projected figure of Rs 28,075 crore.

Strong Demand Environment Boosts Margin to 19.8%, Signaling Growth Momentum

Aided by firm demand trends across key markets and domains, HCLT achieved an appreciable improvement of 139 basis points in its EBIT margin to 19.84%.

Experts had only penciled in 18.7% margin guidance for the quarter. Sharp margin expansion despite macroeconomic headwinds highlights the strength of HCLT’s well-rounded service portfolio.

Healthy order bookings further portray its growth momentum going ahead into FY2025.

HCLT’s revenue breakup indicates well-balanced expansion across industry verticals and geographies on Q3 YoY basis.

While engineering, R&D services jumped 19.5%, the life sciences & healthcare segment saw 15.7% growth. Hi-tech & telecom vertical rose by 5.8% even as the all-important banking, financial services segment was up nearly 6%.

Region-wise, America and Europe led maturity markets powered 17% and 8% growth respectively whereas Rest of World markets rose 12.1%. Such consistency builds long-term business resilience.

Strong Deal Wins, Consulting Strength Support Growth Trajectory

HCLT’s robust deal pipeline, including 10 mega-deals above $100 million, instills confidence around growth sustainability. Consulting-led revenue surged 39% YoY too, proving HCLT’s service transformation is bearing fruits.

CEO C Vijayakumar credited sharp focus on front-ending digital capabilities and verticalization strategy for HCLT’s differentiated performance despite macro wobbles.

Outperforming top Indian IT peers TCS, Infosys and Wipro, these figures reinforce market leader HCLT’s industry bellwether status.

With its Q3 operating margin hitting the higher end of its 18-20% full year guidance, HCLT remains firmly on track regarding its profitability improvement roadmap.

It aims to further extend EBIT margin by 150-200 basis points over the next 2 years as operating leverage kicks in fully. However, elevated talent attrition and supply-side constraints remain key challenges.

HCL Tech Valuation Inches Up but Upside Capped Amid Volatility

Reacting positively to HCLT’s impressive show, its share price rose nearly 4% intraday to hit a new 52-week high. But stock closed below day’s high as investors adopted cautious stance given unstable global macro environment.

While near-term uncertainty caps valuation upside, HCLT remains one of the most resilient and future-ready Indian IT names for long-term investors.

Its industry-best margin profile, stellar growth record across cycles and prudent capital strategy reinforce HCLT’s premium market positioning.

HCL Tech Stays Firm Course Despite Headwinds

Despite growing recessionary fears across Western markets, HCL Tech has displayed stellar business momentum that highlights its growth pedigree and resilience.

Backed by credible demand pipeline, rising service sophistication, stellar customer mining and prudent investments, India’s third-largest software exporter seems firmly set to deliver industry-leading growth in the upcoming year too.

With global IT spending projected to remain firm as digital adoption intensifies across sectors, HCL Tech looks to be in a sweet spot to capitalize on this structural tailwind over the next decade.

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