HCL shares drop after Q1 profit miss, negative outlook for margin

A day after HCL Technologies, an Indian IT services provider, failed expectations for first-quarter profit, the company’s shares fell as much as 2.5%.

Advertisement

A day after HCL Technologies Ltd. failed first-quarter profit projections, primarily because of rising employee-related expenses, the Indian IT services company’s stock price fell as much as 2.5% on Wednesday.

According to Refinitiv data, HCL reported a net profit of 32.83 billion rupees ($412.28 million) on Tuesday, falling short of the average estimate of 33.1 billion rupees.

The company reaffirmed its forecast for sales growth in 2022–2023 at 12–14% in constant currency and stated that it anticipated the earnings before interest and tax (EBIT) margin to be between 18% and 20%.

Advertisement

The margin projection, according to numerous analysts, was underwhelming.

“We expect HCL to continue to struggle (on margin side) due to elevated supply-side issues and weak start to FY23, which will result in its EBIT margin missing the lower end of its guidance by 50 basis points,” Motilal Oswal analysts said in a note.