Broad-based demand for IT exports is resulting in continued volume momentum for top-tier Indian IT exporters and may encourage Infosys Technologies to raise its FY11 full year revenue guidance by 100 basis points, brokerage houses said.
Infosys will kick off the earnings season for technology stocks when it announces its third quarter results on Thursday.
In September, the firm had guided full year revenues growth between 24% and 25% that would result in a top line between $5.95 billion and $6 billion. Analysts said a more encouraging Q3, where the banking, financial services, insurance and retail held up well, should make Infy revise its guidance upwards.
?We expect Infosys to raise its FY11 dollar revenue guidance by 1% to 26% at the higher end due to the expected outperformance of its Q3 dollar revenue. While this may imply a mere 2% sequential growth in Q4, we expect the management to be conservative given the seasonal deceleration in the fourth quarter and uncertainty about budgets,? Motilal Oswal said.
Prabhudas Lilladher too expects Infosys to revise its guidance. ?We expect Infosys to revise their dollar revenue guidance upwards to 25-27% y-o-y and EPS guidance to Rs 117?119. We expect the company to maintain its cautious stance. We expect that guidance above 27% would make strong statement to investors, whereas any downward revision in the dollar revenue would be a big dampener as expectation of a strong result is reflected in the price,? the brokerage house stated.
Infosys had guided full year EPS in the range of Rs 115.07 to Rs 117.07. In terms of Q3 revenue growth, analysts expect the firm to register a sequential inch up between 3% and 5%, or between Rs 7,137 crore and Rs 7,292 crore.
Angel Broking said that the aggregate US macro data for November 2010 pointed towards a sustained recovery going ahead. ?For Q3, we expect growth to continue to be broad-based with the BFSI and retail segments leading the growth path and the manufacturing segment following their footsteps; however, the telecom segment will continue to be laggard. On the back of strong volume growth, stable pricing and favourable cross-currency movement, we expect dollar revenue to surge by 6-8.7% over the previous quarter for tier-I IT companies. This growth will be lower in rupee terms at 3.1-5.1% for rupee being stronger in Q3 at 44.85 v/s 46.48 (in 2QFY2011),? the firm?s analysts said.
The brokerage firm expects Infosys to record a dip of 78 basis points sequentially in its EBIT margins to 29.4% due to the impact of mid-year promotion in October 2010 and 3.4% appreciation in rupee against dollar. The firm sees net profit growing 4.5% in Q3 over the previous quarter.