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Revenue declined & below our expectations: Infosys reported decline in Q4FY24 constant currency revenue growth by 2.2% QoQ but YoY was flat. Its revenue in rupee at Rs 37,923cr, de-growth of 2.3% QoQ but a growth of 1.3% YoY while dollar revenue stood at USD 4,564mn, a de-growth of 2.1% QoQ but up by 0.2% YoY. Amongst Verticals, growth was led by manufacturing, Hi-tech, energy, communications & life science while its 40-41% of business driven by financials service & retail witnessed de-growth. Amongst geographies, Europe drove the growth while North America & India business were muted. For FY24, its revenue in Rupee grew by 4.7% YoY to Rs 1,53,671cr while revenue in dollar was up by 1.9% to USD 18,562mn and growth in constant currency was 1.4% YoY. The growth was driven mainly by the Europe region as well as manufacturing, retail, energy & life science segments.

Margins witnessed a decline but in-line with management expectations: The company’s EBIT stood at Rs 7,621cr which declined by 4.3% QoQ and 3.2% YoY while margins were in-line with management expectation at 20.1%, but it declined by 41bps QoQ and 94bps YoY. Going ahead, management focuses on growing margins in the similar range of 20-22% for FY25, driven by focus on Gen Al & Maximus models and increase in utilization levels. Its PAT stood at Rs 7,975cr, an increase of 30.5% QoQ and 30% YoY with PAT margin at 21% an improvement of 528bps QoQ and 465bps YoY driven by higher other income. For FY24, EBIT grew by 2.7% YoY to Rs 31,747cr with margins at 20.7%, a decline of 40bps.

Order win stood healthy: Infosys won large deals worth USD 4.5bn for the quarter which is higher by 40.6% as compared to last quarter. Out of these 44% were net new. For FY24, it won total deals worth USD 17.7bn.

Marginal easing in attrition: The company’s attrition continued to moderate and stood at 12.6%, down by 30bps QoQ (12.9% in Q3FY24) and 830 bps YoY (20.9% in Q4FY23) which is positive. For FY24, its attrition stood at 12.6% as compared to 20.9% in FY23 (easing of 830bps YoY)

Management guidance better than FY24: For FY25, management guidance seems to be slightly better than FY24 as it suggested revenue growth of 1%-3% in CC which would be driven by focus on newer technology and more winning of larger deals. However, they also mentioned that clients continued to be cautious for discretionary spending and signing new deals. Further, on the operating margin front they maintain similar guidance of 20%-22%

Outlook & Valuation: Infosys results came in below are expectations but was well within the management guidance. We believe as clients are still on the back foot regarding signing new discretionary deals, so the positive outcome on revenue growth may delay by 1-2 quarters but expect overall FY25 to be better than FY24. The growth is expected to be driven by demand for its Gen AI & Cloud as well as automation technology. Besides, their focus remains on optimization and better utilization which will aid to drive margins. On a financial front, we expect revenue/ EBIT to grow by 3.5%/6.1% CAGR over FY24-26E as we have incorporated management guidance for FY25. We continue to maintain our Buy rating and a same target price of Rs 1,738.

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