HCLTECH & WIPRO Q2 PREVIEW

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WIPRO- IT major WIPRO is expected to put on a subdued show for the September quarter of 2022 when it announces its earnings tomorrow. The blue-chip IT company is expected to report a 3-5% increase in quarterly revenue, with year-on-year (YoY) margins declining somewhat, hurting profitability. The bottom line is that the IT exporter should remain flat. The company is expected to report revenue of around Rs. 22,500 crore with net profit of Rs. 2,500-2,700 crore. Wipro is expected to deliver 4% QoQ CC revenue growth in Q2 2023, which is in the middle of its 3-5% QoQ CC guidance range. We expect the margin to increase by 70 basis points but remain below the guidance range of 17-17.5% due to higher compensation and the introduction of quarterly promotions. These headwinds are offset by operational efficiencies, devaluation of the rupee and improvement in occupancy rates.
HCLTECH - After two quarters of severe profitability erosion, HCL Technologies is likely to have seen some improvement in margins in the quarter ended September due to lower operating expenses, subcontracting costs and better pricing. However, the higher turnover will remain a damper and limit the expansion of the margin.

The company's earnings before interest and tax (EBIT) margin is expected to increase sequentially by 30 to 100 basis points from 17%. In the previous two quarters, the company's operating margin contracted by 200 bps.The street will be eager to see if the company lives up to its word when it releases Q2 results tomorrow. HCL Technologies is expected to report sequential consolidated revenue growth of 4% for the quarter to Rs 24,382 crore, averaging five brokerage estimates.

Strong transaction momentum should have supported HCL Technologies' top-line performance, but whether the company maintains its guidance of 12-14% currency-neutral revenue growth for 2022-23 (April-March) will be crucial. As long as transaction momentum continues Strong concerns about an imminent recession in the US and Europe, two key markets for the IT industry, have dampened growth prospects for the sector. Investors will therefore keep an eye on HCL Technologies' view of the demand environment. Peer TCS had said it will be difficult to comment on customer budgets at this point, but acknowledged that long-term commitments from customers in Europe have slowed.