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Dolat Capital Report
Infosys Ltd. reported revenue decline of 1% QoQ in constant currency terms (our estimate:-1.1%), due to seasonal impact of furloughs and normalisation off Q2 base (large pass-through component).
Q3 also included revenue impact of $30 million due to a cybersecurity related disruption at its U.S based subsidiary, McCamish (60 basis points impact).
Operating profit margin stood at 20.5% (our estimate: 20.1%) down 71 bps QoQ, due to 70 bps and 60 bps impact of wage hike and cybersecurity incident, while gaining 50 bps from cost optimisation efforts and 10 bps from current gain.
Infosys tightened guidance to 1.5%-2% in CC (earlier 1%-2.5%) implying Q4 FY24 growth of -1.8% to 0.2%. Operating profit margin outlook was retained at 20-22%.
With macro uncertainty continuing, Infosys' top-line will remain volatile in near term, though cost measures and total contract value wins are notable.
Maintain restrained view and assign 'Reduce' rating and target price of Rs. 1,500 (21 times FY26E).
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