Infosys Shares: Infosys, the country’s second-largest IT services company, posted lower-than-expected earnings growth in the March 2022 quarter, but revenue growth prospects for the current fiscal year have beat analysts’ expectations. The Bengaluru-based IT giant saw its revenue rise 23 percent to Rs 32,276 crore in the recently closed quarter, from Rs 26,311 crore in the previous corresponding period.
Infosys’ March quarter result, however, was below expectations, even as earnings and revenue growth outperformed those reported by its larger peer Tata Consultancy Services (TCS).
EBIT margin declined 190 basis points (bps) quarter-over-quarter (QoQ) to 21.6 percent due to fewer days, lower usage and higher visa costs. The company has forecast a margin of 21-23 percent for FY23 (100 bps lower than the previous forecast in FY22).
Salil Parekh, CEO and MD, said the broad performance was driven by deeply differentiated digital and Infosys Cobalt-led cloud capabilities, enabled by the ‘One Infosys’ approach. “We continue to gain market share as a result of customers’ continued confidence in our ability to successfully navigate their digital journeys.”
The next-generation digital services and consulting firm reported deal gains with a total contract value (TCV) of $9.5 billion for fiscal year 2021-22 and $2.3 billion for Q4FY22. The company added one customer each in the $100 million+ and $10 million+ category. The number of active customers was 1,741 at the end of March 2022, compared to 1,738 customers in December 2021.
Infosys Stock: Should You Buy, Hold or Sell?
IDBI Capital said in its report: “Infosys’ financial performance in Q4FY22 was disappointing, mainly due to contract sales slowdowns and lower large deals in the life sciences industry. However, Infosys has provided robust forecasts for FY23E of 13-15 percent, pointing to a healthy demand outlook. The absence of mega deals, as seen in FY22E, makes this guidance even more robust. We expect margins to improve in H2-FY23 and expect a further 60 basis point improvement in FY24 to 22.6 percent. Maintain the stock’s BUY rating with a revised target price of Rs 2,020 (28x FY24E EPS).
Real estate agency Motilal Oswal said a strong increase in workforce of 22,000, a robust demand environment and a robust revenue forecast for FY23 point to continued strong revenue growth for FY23. We account for 16 percent revenue CAGR over FY22-24. We anticipate a margin of 22.4 percent / 23 percent in FY23/FY24. We lowered our estimate of earnings per share in FY23/FY24 by 5 percent due to slower growth and pressure on margins. See Infosys as a key beneficiary of an acceleration in IT spending given the opportunities surrounding cloud and digital transformation. We value the stock at 28x FY24E EPS and reiterate a buy recommendation.
Foreign brokerage Morgan Stanley said: “F23 forecast for revenue growth stronger than expected at 13-15 percent yoy in constant currency (CC) compared to our estimate of 12-14 percent. Margin guidance of 21-23 percent was in line with our estimate “But below the street at 22-24 percent. In a nutshell, the numbers for the fourth quarter of fiscal year 22 were an overall miss, but good prospects for revenue growth in F23.”
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