Infosys Q3 Results Review — Pass Throughs Drive The Show; Q4 To See Moderation; 'Reduce' Says Dolat Capital

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Dolat Capital Report

Infosys Ltd. reported a solid quarter with revenue of $4.94 billion up 1.7% constant currency QoQ (our estimate of +0.6%) led continued uptick in financial services (+3% QoQ), robust recovery in retail (+4.7%) and ~20 basis points contribution from in-tech, despite Q3 furloughs. Operating profit margin expanded by 24 bps QoQ to 21.3%, aided by net currency benefits and operational efficiencies.

The company raised FY25E CC Rev guidance in 4.5%-5% range (Previous 3.75%-4.5%) citing an improved deal pipeline, but it implies negative 1-2% growth for Q4, while OPM guidance is retained at 20-22%. The recovery is limited to certain verticals and visibility for CY’25 is heavily dependent on client budgets (known likely in Feb).

Our FY25/FY26E earnings estimates remain largely unchanged while FY27E have been lowered by 1.6%. Although the outlook has shown improvement, we maintain a cautious stance until the updated FY’26 guidance and client budget outlook. Maintain ‘Reduce’ rating with target price of Rs 2,060, valued at 27x of FY27E earnings.

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