Infosys’ earnings before interest and tax margins are expected to contract 75 bps q-o-q
IT major Infosys, which is set to announce its financial results on Sunday, is expected to report revenue growth of 4-6 per cent quarter-on-quarter (q-o-q) to Rs 34,036 crore in June 2022 quarter, led by momentum from financial services, retail, communication, energy and manufacturing. The company had reported a revenue of Rs 32,276 crore in the last quarter of FY22.
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ICICI Securities in its report said, “Infosys is expected to register 4.5 per cent q-o-q growth in CC (constant currency) led by momentum from financial services, retail, communication, energy and manufacturing. Cross currency headwinds of 100 bps would lead to 3.5 per cent q-o-q growth in the dollar terms. Rupee revenues are expected to increase 6 per cent q-o-q aided by rupee depreciation.”
It added that EBIT (earnings before interest and tax) margins are expected to contract 75 bps q-o-q due to an increase in employee cost, retention costs while there would be reversal of contractual provisions made in Q4 and rupee depreciation would help margins to some extent for the quarter.
According to foreign brokerage firm BNP Paribas, Infosys is expected to register revenue growth of 5.5 per cent QoQ to Rs 34,036 crore in Q1FY23 on strong deal pipeline. However, the IT company is expected to maintain its FY23 guidance for revenue growth of 13-15 per cent CC and EBIT margin of 21-23 per cent. On the back of supply-side challenges like travel and facility costs, analysts foresee 59 bps Ebit margin squeeze sequentially to 21 per cent.
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Motilal Oswal in its note said Infosys is expected to deliver a 21.3 per cent year-on-year revenue growth to Rs 33,800 crore in Q1 from Rs 27,900 crore. However, incremental impact on the margin front is likely due to supply-side challenges and wage inflation. The Ebit margin is expected at 20.8 per cent in Q1FY23. PAT, meanwhile, is estimated to surge 9.7 per cent y-o-y to Rs 5,700 crore from Rs 5,200 crore.
Another brokerage firm, IIFL Securities said Infosys may post a 3.6 per cent q-o-q revenue growth in constant currency terms to Rs 33,812 crore, driven by broad-based growth across verticals and strong order book momentum. However, it expects margins to remain flat at 21.5 per cent, despite wage hikes and absence of visa costs or one-off client-related costs in Q4FY22. Net income, on the other hand, is estimated to grow 1.7 per cent QoQ to Rs 5,784 crore in Q1.
During the March 2022 quarter, the company reported a consolidated net profit of Rs 5,686 crore, a growth of 12 per cent as compared with Rs 5,076 crore in the year-ago quarter. The company’s revenue jumped 22.7 per cent to Rs 32,276 crore, against Rs 26,311 crore in the March 2021 quarter.
On the outlook, Infosys has given a revenue growth guidance of 13-15 per cent in the constant currency term for the financial year 2022-23. The guidance on operating margin for FY23 is 21-23 per cent.
