Infosys net profit likely to surge up to 10% YoY in Q1FY23, say analysts

Infosys Q1 preview: Investors will closely monitor the management's commentary on clients' IT spending, demand environment amid macro stress, margin outlook, and growth guidance for FY23

Infosys Q1 preview: IT major Infosys is likely to report revenue growth in the range of 5 to 6 per cent quarter-on-quarter (QoQ) to Rs 34,219 crore in June quarter (Q1FY23), driven by strong deal pipeline and order book momentum. The tech services firm had reported revenue at Rs 32,276 crore in the last quarter of FY22 (Q4FY22). Infosys is slated to report its results on Sunday, July 24.

Analysts also anticipate incremental impact on the margin front due to supply-side challenges, wage revision, higher attrition, and travel and facility costs. They expect Ebit margin to contract in the range of 66 to 105 basis points (bps) QoQ to 20.9 per cent from 21.6 per cent. Net profit, too, is estimated to squeeze by 1.4 per cent QoQ to Rs 5,606 crore from Rs 5,686 crore. However, it is projected to rise 8 per cent on a year-on-year (YoY) basis.

At the bourses, Infosys bled 19 per cent so far in this calendar year. In comparison, frontline indices Nifty50 and the S&P BSE Sensex have tumbled 5 per cent each.

Factors to watch out

Investors will closely monitor the management’s commentary on clients’ IT spending, demand environment amid macro stress, commentary on mix of deal sizes, margin outlook given rising attrition rate, supply-side concerns, pricing outlook, and revenue growth and margin guidance for FY23.

Here’s a compilation of what top brokerage houses estimate for Infosys in Q1FY23:

Philip Capital: The brokerage firm expects Infosys to register strong revenue growth of 5.9 per cent QoQ to Rs 34,169 crore in Q1 from Rs 32,276 crore, driven by strong deal momentum and low base of the last quarter. However, they expect margins to decline 150 bps QoQ to 20.1 per cent from 21.6 per cent due to salary hikes, supply-side pressures, and travel costs. That said, they anticipate the IT major to retain 13 to 15 per cent CC revenue growth and 21 to 33 per cent EBIT margin guidance.

Motilal Oswal: Analysts expect the IT firm to deliver 21.3 per cent YoY revenue growth to Rs 33,800 crore in Q1 from Rs 27,900 crore. However, incremental impact on the margin front is likely due to supply-side challenges and wage inflation. They anticipate Ebit margin at 20.8 per cent in Q1FY23. PAT, meanwhile, is estimated to surge 9.7 per cent YoY to Rs 5,700 crore from Rs 5,200 crore.

IIFL Securities: The brokerage firm forecasts 3.6 per cent QoQ revenue growth in CC terms to Rs 33,812 crore, driven by broad-based growth across verticals and strong order book momentum. However, they expect margins to remain flat at 21.5 per cent, despite wage hikes and absence of visa costs or one-off client-related costs in Q4FY22. Net income, on the other hand, is estimated to grow 1.7 per cent QoQ to Rs 5,784 crore in Q1.

Sharekhan: Analysts anticipate the IT major to report revenue growth of 5.7 per cent QoQ to Rs 34,129 crore. In dollar terms, they expect Infosys to post revenue growth of 4.5 per cent QoQ to $4,421 million, driven by growth in digital transformation programmes, strong discretionary spends, and low base of last quarter. They anticipate overall deal signings to remain healthy in the range of $2.5 to $3 billion. However, Ebit margin is likely to depreciate by 66 bps to 20.9 per cent due to wage revision and higher travel expenses.

BNP Paribas: The brokerage firm models Infosys to register revenue growth of 5.5 per cent QoQ to Rs 34,036 crore in Q1FY23 on strong deal pipeline. However, they expect the IT firm to maintain their FY23 guidance for revenue growth of 13 to 15 per cent CC and Ebit margin of 21 to 23 per cent. On the back of supply-side challenges like travel and facility costs, analysts foresee 59 bps Ebit margin squeeze sequentially to 21 per cent.