IGI Logo

Result Synopsis

Infosys (INFO) reported weak financial performance for the quarter. Both, the sequential revenue growth and EBIT margin was below expectation. It reported decrease in revenue by 3.2% QoQ in cc terms led by unplanned project ramp downs in Retail, Hitech, BFSI and Telecom verticals. Revenue declined by 2.3% QoQ in USD terms (down 2.3% QoQ in INR terms). EBIT margin declined by 47 bps QoQ at 21.0% led by lower utilization and one-off  revenue impact in the quarter. There was some moderation in employee attrition as LTM attrition was down 340 bps QoQ to 20.9%.

The multiyear tech adoption cycle broadly remains intact led by adoption of cloud and data analytics. However, the clients remain cautious regarding the evolving macroeconomic situation in the US and Europe and there has been slowdown in discretionary tech spending in sectors such as Hitech, Retail, Telecom, etc. and it is expected to lead to near term moderation in revenue growth. Employee attrition has started moderating and should support operating margin going ahead. We estimate revenue CAGR of 11.9% over FY23?25E with average EBIT margin of 22.1%. We rollover to FY25E estimates and maintain our BUY rating on the stock with revised target price of Rs 1,676/share at 22.0x on FY25E EPS. The stock trades at PER of 21.1x/18.1x on
FY24E/FY25E EPS.

Result Highlights

* Reported revenue of Rs 374.4bn (down 2.3% QoQ in INR terms, down 2.3% QoQ in USD terms) led by project ramp downs in Telecom, Retail, Hitech and BFSI verticals. The revenue decreased by 3.2% QoQ in cc terms. Digital now accounts for 62.9% of     revenue vs 62.9% in Q3FY23. In terms of verticals, the YoY growth was led by Manufacturing (up 26.5% YoY in cc terms) and Energy and Utilities (up 17.1% YoY in cc terms).
* EBIT margin dipped by 47 bps QoQ to 21.0%, led by increase in Selling and Marketing Expenses (up 3.0% QoQ) during the quarter.
* Reported Large deal wins of $2.1bn vs $3.3bn in Q3FY23.
* Gross client addition was 115 vs 134 in Q3FY23. Days sales outstanding decreased to 62 days vs 68 in Q3FY23.
* Offshore effort mix was down 10 bps QoQ to 75.4%. Added (3,611) employees in the quarter to close at 3,43,234 employees. LTM attrition was down 340 bps QoQ to 20.9%. Utilization (excluding trainees) was down 170 bps QoQ to 80.0%.
* Declared a final dividend of Rs 17.5/- per share. Guided for 4-7% revenue growth in CC terms for FY24, with EBIT margin band of 20-22%.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer