Tech Mahindra Q2 Preview: Profit to fall 42% YoY; deal wins seen muted

Tech Mahindra Q3 result preview: Tech Mahindra is expected to see a sequential decline in quarterly revenue due to weakness in the communication vertical segment and higher furloughs. Revenue from operations is expected to decline between 1-1.4% quarter-on-quarter. Margins are likely to expand on a QoQ basis due to portfolio reshuffling. Deal wins are expected to remain muted. Investors should watch out for deal wins, pipeline from the communication vertical, pricing scenario, attrition, and outlook on growth.

HCL Tech Q2 Preview: HCL Techs Q2 consolidated revenue is seen rising a mere 2% sequentially to Rs 26,804.4 crore according to the average of estimates given by nine brokerage firms. But on a year-on-year (YoY) basis, it is seen increasing by 9%. Consolidated net profit may rise 5% sequentially and over 6% YoY to Rs 3,707 crore, the estimates showed.

HCL Technologies Q4 earnings are due for release. Although the services business is expected to be the driving force behind growth, seasonal weakness has led most analysts to expect a sequential decline in constant currency revenue, with software revenue in particular forecast to report a sharp decline. Reliance Securities sees HCL's revenue declining 1.6% QoQ in CC and Guidances are for an expectation of a 5-7% YoY revenue growth and 18.5-19.5% margin guidance for FY24.

After a soft June quarter, which usually is the strongest for the IT industry, analysts expect Wipro to give a muted guidance for the September quarter.

Hindustan Unilever is set to reveal Q4 2018 revenue growth led by price hikes with volume growth driven by mid single-digits in the skin cleansing sector. Despite an anticipated dip in margins due to a hike in ad-spend and a 30 bps royalty impact, Jefferies suggests the YoY margin decline will be around 60 bps versus 100-200 bps seen in the nine months ending December 2017. Gross margins are expected to rise quarter-on-quarter while the company could see continued strength in home care revenue growth due to increases in laundering prices.

Tech Mahindr’s profit is expected to fall by 13.9% YoY, while revenue in constant currency terms is expected to decline by 0.7%.

Wipro is likely to report around 1.6% sequential decline in revenue in constant currency terms for the IT services segment at around ₹23,000 crore in Q1FY24 given the continued weakness in its banking and consulting business.

Wipro has guided for a CC revenue growth in the range of -0.6% to 1% QoQ. In line with this, Jefferies estimates revenue growth of 0.5% QoQ cc in the fourth quarter. Meanwhile, Kotak Institutional Equities is seeing the figure at the lower end of the guidance -0.4%.

Shares of Tech Mahindra fell more than 6% following disappointing Q3 results. Kotak Institutional Equities and Nuvama retained their 'Reduce' ratings. Kotak highlighted the long turnaround journey for Tech Mahindra despite healthy revenue growth, citing macro challenges and weak telecom outlook. Nuvama called Q3 earnings a mixed bag with an uncertain outlook, noting lower EBIT margin and weak bookings.

A deep retrenchment in the tech sector again reverberated through the ad industry’s quarterly results.