Infosys, Wipro Q4 Preview - No Change In Relative Positioning Despite Worsening Macros: ICICI Securities

ICICI Securities Report

We expect Infosys Ltd.’s revenue growth to be soft at 0.1% QoQ constant currency, given Q4 FY23 is a seasonally weak quarter for Infosys. This translates to 16.4% YoY CC growth in FY23E within the company’s guided range of 16-16.5%.

We estimate 110 basis points cross-currency tailwinds in Q4 FY23. We model 21.5% Ebit margin, flat QoQ in Q4 FY23 and 21.2% in FY23, in line with management commentary of achieving margins near the lower end of guidance of 21-22%.

Large deal wins were strong in Q3 FY23 at $3.3 billion (20% QoQ, 31% YoY), partly aided by the closure of a bunch of license deals. Pipeline is replenished, but we expect deal total contract value in the range of $2.5-3 billion, decline on QoQ basis.

We expect Infosys to start the year with conservative guidance of 6-8% given the recent events in global banking industry (banking, financial services and insurance accounts to 32% of Infosy’s annual revenue) and overall caution in new deal singings.

We expect Wipro Ltd.’s revenue to decline by 0.5% QoQ CC in Q4 FY23, translating to 11.5% YoY CC growth in FY23E, near the lower end of the guided range of 11.5-12% in FY23, given the weakness in consulting business and worsening macro environment.

We estimate ~100 bps cross-currency revenue tailwind for Wipro. We expect Ebit margin to be largely flattish (~20- 30 bps), QoQ expansion in Q4 FY23. We expect Wipro to guide -1% to up 1% QoQ CC revenue growth for Q1 FY24.

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