Home Market Infosys gains 2% ahead of Q2 results; what experts say

Infosys gains 2% ahead of Q2 results; what experts say


NEW DELHI: Shares of Infosys climbed 2 per cent in Tuesdays trade ahead of the IT majors second quarter results. All eyes will be on any revision in revenue growth guidance for FY19, outlook on BFSI space, performance of digital vertical and upward estimate in margins, if any, in the wake of rupee depreciation.

Shares of the second largest IT player by revenues rose 2 per cent to hit a high of Rs 713.15 on BSE.

HDFC Securities has pencilled in a 2 per cent QoQ (5.9 per cent YoY) growth at $2.88 billion. It estimated rupee revenues at 20,219 crore, up 5.7 per cent QoQ or 15.1 per cent YoY. The brokerage has estimated Ebit margin at 24.4 per cent, up 70 basis points on sequential basis. Adjusted profit is seen rising 1.8 per cent QoQ (or 4 per cent) to Rs 3,875 crore.

Nirmal Bang Institutional Equities said that the strong performance of IT stocks over the last 5 quarters seems to be price in continued strong growth into FY20, which the brokerage is skeptical about.

It expects guidance on revenue growth and margins to be maintained between 6 per cent and 8 per cent in CC terms and 22-24 per cent band, respectively.

Brokerage Edelweiss Securities expects the IT major to report 3.4 per cent sequential rise in revenues in constant currency (CC) terms, hurt by 100 basis points to cross currency headwinds. Dollar revenues is seen growing at 2.4 per cent QoQ).

“Ebitda margin expected to rise 120 bps QoQ because rupee depreciation benefits (100 bps) and absence of visa cost and efficiencies (by 80 bps). But the numbers will be hurt by wage hikes to senior employees (60 bps). Commentary on demand environment, growth in digital, deal wins will be key monitorables,” the brokerage said.

Consulting had been a pain point for Infosys over the past 12-24 months Nirmal Bang Institutional Equities noted.

Infosys states even that has been sorted out, although it needs to bring the margin up to a more desirable level, the brokerage said.

“One needs to see how much of the rupee related gains are retained and how much spent Infosys is going to invest in digital capability building and sales that it committed to at the beginning of FY19, it said.

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