HCL Tech Q1 profit up 6%; expects FY17 revenue growth at 12-14%-:- Equity Research

Country's fourth largest IT services exporter HCL Technologies   started off the financial year 2016-17 on a strong note with April-June quarter earnings beating analysts' expectations on all parameters. Profit and revenue increased by 6.3 percent and 6 percent to Rs 2,047 crore and revenue at Rs 11,336 crore on sequential basis, respectively. "Growth momentum is broad–based, encompassing all sectors and service lines, propelled by robust 21 Century Enterprise strategy and robust business model”, Anant Gupta, President & CEO, HCL Technologies in a release said. Profit was estimated at Rs 1,890 crore on revenue of Rs 11,255 crore for the quarter, according to average of estimates of analysts polled by CNBC-TV18. Dollar revenue for the quarter grew by 6.5 percent to USD  USD 1,691 million on QoQ basis, which was expected at USD 1,678.5 million, and increased 6 percent in constant currency. HCL Technologies expects FY17 constant currency revenue growth in the range of 12-14 percent that translates to 11.2-13.2 percent in US dollar terms, and operating margin (EBIT) in range of 19.5-20.5 percent. While addressing press conference, Gupta said contribution of Volvo was at USD 40 million in Q1, adding FY17 guidance does not include Geometric acquisition. The company acquired external IT business of Volvo Group in February and Geometric in April. "We have offshore wage hike at 6-8 percent & onshore at 2-3 percent, which will impact margins by 160 basis pointspoints spread over Q2 & Q3," he said. Its FY17 revenue growth guidance is much ahead of industry growth of 10-12 percent predicted by NASSCOM. Operating profit increased 5 percent quarter-on-quarter to Rs 2,333 crore and margin contracted by 22 basis points at 20.58 percent in June quarter. Analysts had estimated operating profit at Rs 2,195 crore and margin at 19.5 percent for the quarter. “We have been able to maintain margins led by increased adoption of automation and higher offshoring. Layered hedging policy allowed to manage significant currency volatility this quarter and post exchange gains," Anil Chanana, CFO said.