Infosys maintained its Ebit margin guidance of 20-22%. However, competitive intensity has prevented the expected price increases, while wage hikes, acquisition amortisation and softer seasonality are likely to weigh on margins in H2. A confluence of factors such as weaker volumes, lower-than expected price increases, offshoring and the decision to walk away from a large European manufacturing deal has weighed on growth. Infosys has cut its FY27 revenue growth guidance to 1-2% YoY CC from 1.5-3.0%, while organic growth guidance was reduced to -0.5% to 0.5% from -0.2% to 1.3%.
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Motilal Oswal Report
Following Infosys Ltd.'s September-quarter tepid results, domestic brokerage firm Motilal Oswal has trimmed its FY27/FY28 earnings per share estimates by ~1.5%/2% to factor in lower FY27 organic growth guidance and continued pricing pressure from AI-led productivity deflation.
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While AI revenue continues to scale up, the brokerage believes productivity pass-through on the existing book of business will remain a nearterm headwind.
Execution on deal conversion and pricing remains a key monitorable.
Motilal Oswal has valueed Infosys at 16 times FY28E earnings per share and arrived at a target price of Rs 1,300, implying ~13% upside and has reiterated Buy on the stock.
Infosys' reported Q2 FY27 revenue of $5.1 billion, up 1.2% QoQ. In constant currency, it was up 1.2% QoQ, below Motilal Oswal's estimates of 1.8% QoQ. Adjusted Ebit margin stood at 21%, in line with estimate of 21.1%. Adjusted Ebit rose 1.6% QoQ/10.4% YoY to Rs 10,300 crore vs estimate of Rs 10,400 crore.
Adjusted PAT came in at Rs 7,800 crore, up 0.6% QoQ/ 6.2% YoY, below Motilal Oswal's estimate of Rs 8,100 crore.
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