Infosys shares: Infosys, the country’s second largest IT services company, posted lower-than-expected earnings for the March 2022 quarter, but its revenue growth guidance for the current fiscal has exceeded analysts’ expectations. The Bengaluru-based IT major saw its revenue rise by 23 per cent to Rs 32,276 crore in the recently ended quarter, as against Rs 26,311 crore in the previous same period.
However, Infosys reported lower-than-expected March quarter results, while its profit and revenue growth were better than its larger counterpart Tata Consultancy Services (TCS).
EBIT margin fell 190 basis points (bps) quarter-on-quarter (QoQ) to 21.6 percent due to fewer days, lower utilization and higher visa costs. The company has guided on margins of 21-23 per cent for FY13 (100bp cut from its earlier guidance in FY12).
CEO and MD Salil Parekh said the broad-based performance was driven by digital and Infosys Cobalt-led cloud capabilities driven by the ‘One Infosys’ approach. “We continue to gain market share as a result of continued customer confidence in our ability to successfully navigate their digital journey.”
The next generation digital services and consulting firm reported a deal win for fiscal year 2021-22 with a total contract value (TCV) of $9.5 billion and $2.3 billion for Q4FY22. The company added one client each in the $100 million+ bucket and $10 million+ category. It had 1,741 active subscribers at the end of March 2022, up from 1,738 subscribers at the end of December 2021.
Infosys Shares: Should you buy, hold or sell?
IDBI Capital in its report said, “Infosys’s Q4FY22 financial performance was disappointing primarily due to delay in contract sales bookings and fewer large deals in the life-sciences vertical. However, Infosys gave strong guidance of 13-15 per cent for FY23E.” This indicates a healthy demand outlook. As seen in FY22E, absence of mega deal wins further strengthens this guidance. We expect margins to improve in H2-FY23 and FY23 Expect a correction of 60 bps and 22.6 per cent in 24. Maintain BUY rating on the stock with a revised target price of Rs 2,020 (28x FY24E EPS).
Brokerage firm Motilal Oswal said a strong headcount at 22,000, a strong demand environment and a strong revenue guidance for FY23 point to strong revenue growth for FY23. We factor in 16 per cent revenue CAGR during FY22-24. We look at a margin of 22.4 per cent / 23 per cent in FY23/FY24. We have reduced our FY23/FY24 EPS estimate by 5 per cent on slowing growth and margin pressure. Given its capabilities around the cloud and digital transformation, see Infosys as a key beneficiary of the IT spending boom. We value the stock at 28x FY24E EPS and reiterate a buy rating.
Foreign brokerage Morgan Stanley said, “F23 revenue growth guidance is strong at 13-15 percent year-on-year against our 12-14 percent estimate in constant currency (CC) terms. Margin guidance of 21-23 percent was in line with our estimate.” , but was down the street at 22-24 percent. In short, Q4-FY22 were the number one all-around miss, but there was good F23 revenue growth guidance.”
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