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Nirmal Bang Report
HCL Technologies Ltd. in Q1 FY23 delivered constant currency QoQ revenue growth of ~2.7%, above our estimate of 1.1% with strong services net new deal wins of $2 billion plus per quarter offsetting productivity-linked seasonal compression.
HCL Tech's services business grew by 2.3% QoQ after a compound quarterly growth rate of ~5.2%, over the last three quarters of FY22.
However, the big let-down was Ebit margin, which came in at 17% against our estimate of 17.9%. This was due to a poor performance of services margin, which stood at 15.7% (down by 150 basis points QoQ even before higher salaries kick in from Q2 FY23) due to higher outsourcing /subcontractor costs (100 bps), employee retention costs (50 bps) and travel and visa costs (35 bps).
These were, to some extent offset by gains from currency depreciation.
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