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One-offs boost guidance, but demand improving

* INFO reported 1QFY25 revenues of USD4,714b, growth of 3.6% QoQ/2.5% YoY CC vs. our estimate of ~2% QoQ CC. EBIT margins stood at 21.1% vs. our estimates of 20.4%. EBIT grew 9% QoQ/5.5% YoY to INR83b (est. INR79b). PAT came in at INR64b, up 4.8% QoQ/7.1% YoY, in line with our estimate of INR64b. Deal wins were strong at USD4.1b (flat QoQ). INFO upgraded its FY25 revenue growth guidance to 3-4% YoY in CC (1-3% earlier). The growth outperformance during the quarter was driven by ~45% QoQ growth in India business, which was a one-off event.

* The guidance upgrade was largely driven by the acquisition of In-tech (~0.8% revenue contribution for FY25E) and the push from the one-off revenue spike in its India business. However, commentary on growth recovery in North America and financial services was encouraging. Pressure on discretionary spending persists, but we believe the cycle is turning and clients are finally considering re-investing their savings from cost-reduction programs to reduce their technological debt.

* The implied CQGR to hit the upper end of the organic guidance range is 1.2%. This is conservative, in our view; that said, growth certainly has been front-ended and 2HFY25 would be meaningfully slower than 1H. There is upside potential to the implied CQGR if short-cycle deals improve and flow business recovers.

* EBIT margins improved by 100bp QoQ, led by one-time benefits. We estimate EBIT margins to be at the midpoint of the guided range for FY26, with room for improvement as volumes recover in FY26E.

* We increase our FY25 estimates by 3%, driven by the in-tech acquisition and the one-off gain from India business. We upgrade our FY26 estimates by ~6% largely on lower ETR and slightly higher revenues. We view INFO as a beneficiary of acceleration in IT spending over the medium term. We value the stock at 25x FY26E EPS and reiterate our BUY rating.

Healthy beat on revenue and margins, but driven by one-offs

* USD revenue grew 3% QoQ to USD4.7b. In CC, it was up 3.6% QoQ, above our estimate of 2.0% QoQ.

* FY25 USD CC revenue growth guidance was increased to 3-4% YoY CC.

* EBIT margin expanded 100bp QoQ to 21.1%. Employee count declined 0.6% QoQ. Total headcount stood at ~315k.

* EBIT margin guidance was maintained at 20-22% range.

* Large deal TCV stood at USD4.1b vs. USD4.5b in 4Q. The book-to-bill ratio was 0.8x.

* LTM attrition was down 10bp QoQ at 12.7%. Utilization rose 180bp QoQ (ex trainees).

* Adj. net profit grew 4.8% QoQ to INR63.6b, in line with our estimate.

Key highlights from the management commentary

* INFO saw growth across all major geographies and verticals. Both volume growth and realization improved this quarter. INFO is seeing good traction in cost efficiency and consolidation deals.

* BFSI vertical returned to growth after six quarters due to the ramp-up of large deals and the absence of one-offs.

* Early signs of improvement are visible in the US market. Discretionary spending remains under pressure.

* INFO reported the highest number of large deal wins at 34 with TCV of USD4.1b (57.6% net new deals). It signed eight deals in retail and communication each, six in energy & utilities, five in financial services, four in manufacturing, two in high tech, and one in life sciences.

* India business gave a revenue boost of 0.5%. However, it is a relatively smaller business and this was a one-time increase in 1Q.

* INFO revised its revenue growth guidance to 3-4% CC and maintained its margin guidance in the range of 20-22%.

Valuation and view

* INFO’s FY25 revenue growth guidance upgrade was largely driven by a one-time India business spike and inorganic impact, but strong deal wins should improve its medium-term growth outlook. It has maintained its margin guidance, but continues to see upside potential in the medium term, which we see as encouraging.

* We expect INFO to be a key beneficiary of the acceleration in IT spending in the medium term. We value the stock at 25x FY26E EPS, implying a rounded TP of INR2,000. Retain BUY.

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