Infosys Q4 Results Review - Big Miss, Muted Guidance; Would Lead To De-Rating: Dolat Capital

Dolat Capital Report

Infosys Ltd. reported revenue decline of 3.2% QoQ in constant currency terms (our estimate: 0.3%), due to onetime revenue impact led by decline in volume, certain client specific issues and project cancellations.

Concern spanned across banking, financial services and insurance/teleco/hitech verticals that collectively account nearly half of revenues.

Operating profit margin declined by 50 basis points QoQ to 21% (our estimae: 21.2%), with tailwind from sub-con (up 50 basis points), reduction in fixed customer support (up 60 bps), offset by utilisation (down 70 bps) and one-off revenue impact (down 90 bps).

Infosys has given revenue growth guidance of 4-7% in CC terms (versus our expectation of 6- 8%) for FY24, while operating profit margin at 20-22%.

Revenue band widened due to lot of uncertainties as clients continue to focus on cost optimisation, delayed decision making and ramp down of deals.

Big miss in FY23 revenue guidance (by 110 bps at top-end), weak outlook for FY24E resulted in cut in our earnings estimates by 3%/5% for FY24/FY25E.

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