Infosys Q4 Preview: Profit may weaken sequentially; FY24 guidance eyed

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IT major Infosys is set to release its March quarter (Q4FY23) results on Thursday, April 13. Analysts expect the company to report muted quarter-on-quarter (QoQ) revenue growth between 0.1-0.7 per cent in constant currency (cc) terms in the traditionally weak quarter.

In rupee terms, the company can report a YoY revenue growth of 20-21 per cent to an average of Rs 38,824 crore, as per a compilation of six brokerage estimates, while its yearly profit may rise 12-21 per cent to an average of Rs 6,589 crore.

 

While four of the six brokerage houses expect the company’s profit to decline QoQ in Q4. Kotak Institutional Equities estimates a 3.1 per cent quarterly decline in profit, followed by Sharekhan at 1.4 per cent, HDFC at 0.8 per cent and Jefferies at 0.1 per cent. 

The company’s Ebit margin is pegged between 21.3-21.8 per cent in Q4 as compared to 21.5 per cent in the December quarter. 

 

Besides, Infosys is expected to deliver annual FY24 revenue guidance (cc) between 5-8 per cent and Ebit margin guidance of 21-23 per cent.  

Key monitorables: Investor focus will remain on FY24 guidance. The quantum of deal pipeline, nature of large deals, pace of decision-making and drivers of consolidation trend will also be closely tracked. Commentary on health of impacted verticals such as hi-tech, retail, parts of financial services and Europe, re-allocation of responsibilities of former President Mohit Joshi, and impact of recent banking sector events on BFSI tech spending outlook.

Here's what brokerages expect: 

Jefferies: The brokerage expects soft QoQ cc revenue growth due to the macroeconomic slowdown and seasonal weakness. The Ebit margin is expected to expand slightly by 30 bps QoQ driven by increase in utilization and currency benefit. Large deal wins are expected to be in the $2-2.5 billion range supported by larger deals amid slower decision making.

 

PhillipCapital: The brokerage expects cc revenue growth of 0.1 per cent on a QoQ basis and 1 per cent in dollar terms. It expects margins to decline marginally QoQ by 10 bps due to a lack of growth leverage and visa costs, which will be offset by easing of supply side pressures.

Kotak Institutional Equities: The brokerage expects Infosys to post a muted 0.1 per cent cc revenue growth driven by both cloud and digital programs and cost take-out agenda of clients. It does not expect material incremental revenue contribution from the Daimler deal. It sees 25 bps sequential decline in Ebit margin with headwinds from visa costs (40 bps) partially offset by operational efficiencies and lower pass-through expense.

 

The brokerage said that a front-ended growth guidance will give a lot more comfort and even create scope for upgrades. A back-ended growth guidance, meanwhile, may not be viewed favourably.

Sharekhan: The company is expected to post flat CC QoQ revenue growth with a likely 80 bps cross currency tailwind that can lead to QoQ dollar revenue growth of 0.8 per cent. Weakness in operating margin is likely and the brokerage expects Ebit margins to fall by 25 bps QoQ.

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