HCL Technologies Ltd has surprised the Street, indicating more robust growth for the September quarter (Q2 FY21). Now, the company expects constant currency revenue growth to exceed 3.5 per cent in 2019, which is higher than 1.5-2.5 per cent in July.

The operating profit margin guidance of 20.5-21.0 per cent for the quarter is also higher than its FY21 guided range of 19.5-20.5 per cent. The company was among the worst hit in frontline IT companies in the June quarter. Dollar revenue dropped 7.4 per cent sequentially last quarter, higher than the 2-7.3 per cent fall at Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd. The sharp fall is expected to weigh on HCL’s full-year revenue. But a stronger recovery in the September quarter improves the chances of HCL clocking notable revenue growth in FY21. ‘We built 1.5 per cent quarter-on-quarter constant currency growth and 20.1 per cent EBIT margin for 2QFY21, and hence this is much better on both growth and margin. Also note as the constant currency is a tailwind for Q2, dollar revenue growth for 2QFY21 could be 4.8 per cent,’ says an analyst at a broking firm. “Company (can) now comfortably deliver flattish dollar revenues for full-year FY21 (vs 2.8% decline in dollar revenues for FY21 modelled earlier).’ EBIT is earnings before interest and tax.

Consequently, HCL’s net earnings in the current quarter will likely be 10 per cent ahead of consensus estimates, points out an analyst at another brokerage firm.

This is driving gains in HCL stock. While HCL’s valuation discount to its larger peers TCS and Infosys is also aiding gains, the commentary is even lifting the shares of other IT companies. TCS, Infosys, Wipro gained in the range of 2-3 per cent. All of them have hit new 52 week highs in the last two months.