Infosys Q3FY22 results preview: Revenue may grow up to 4%, mixed view on margins; guidance to improve

Infosys is likely to post up to 4 per cent revenue growth in constant currency terms in the October-December quarter of FY22, said analysts.

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Earlier this month, Infosys stock hit a fresh 52-week high of Rs 1,914 apiece.

Infosys is likely to post up to 4 per cent revenue growth in constant currency terms in the October-December quarter of FY22, said analysts. The company will announce its quarterly results along with TCS, and Wipro later this week. Infosys share price surged over 2 per cent on BSE on Monday, ahead of third quarter results scheduled to be released on Wednesday, 12 January 2022. Earlier this month, Infosys stock hit a fresh 52-week high of Rs 1,914 apiece. Nifty IT index has also gained over a per cent intraday led by Infosys, Tech Mahindra, Tata Consultancy Services (TCS), which were in the range of 1-2.3 per cent.

What to expect from Infosys Q3FY22 results

Motilal Oswal Financial Services: The research firm has recommended to buy Infosys stock with a price target of Rs 1,960 apiece. It expects a strong revenue growth with some seasonality impact, led by a ramp up in large deals (Daimler deal ramp-up for one month). It also expects the momentum in large deal wins to continue. “Expect an impact on margin on account of supply-side challenges and wage hikes. We also expect an upward revision in its FY22 revenue growth guidance. This will remain a key monitorable,” it said.

Prabhudas Lilladher: The research firm has a ‘buy’ rating on Infosys stock with a target price of rs 2,063 apiece, a rally of 14 per cent from the current levels. Infosys started the year with revenue growth guidance of 12-14% in CC. The research firm expects the IT bellwether to post 3.9 per cent revenue growth in CC on sequential basis. Growth will be led by Daimler mega-deal and continued broad-based strength in demand. It noted that margins are likely to remain flattish despite pressures from higher subcontracting costs, skill based wage hikes, backfilling of attrition etc led by benefits from pyramid optimization and revenue growth leverage. “We expect Infosys to upgrade narrow down revenue guidance band to 17-17.5% YoY CC from 16.5-17.5% given earlier. We anticipate EBIT margin guidance of 22-24% to remain unchanged,” it added. The research firm expects investors to focus on the pipeline of large deals; attrition trend; impact on margins due to higher attrition; update on pricing; guidance; and IT budgets for CY22E.

Nirmal Bang: It expects Infosys to grow revenue by 4% CC QoQ on the back of its strong deal wins in the last 12 months. The research firm also expects margins to expand QoQ due to lower employee compensation (owing to completion of wage hikes in 2QFY22), operating leverage and higher offshoring. “We expect the attrition rate of 20.1% (LTM in IT Services) in 2QFY22 to marginally increase in 3QFY22 before stablising over the next couple of quarters. Would look for any shift in fresher hiring guidance,” it said. The research firm would watch for hints as to where Infosys would land up within the margin guidance of 22-24% that it has given for FY22.

Edelweiss Research: The research firm expects Infosys to report revenue growth of 3% QoQ in constant currency. It believes that Infosys will be a key beneficiary of core transformation; accelerated cloud and digital adoption; deal ramp-up; and iv) market share gain due to persistent market loss by key players such as Capgemini and Cognizant. “We believe the company would increase the guidance from 16.5–17.5%. We also expect Infosys to post margin improvement of 60bps QoQ due to supply side challenges cooling off, price increase and operating leverage,” it said. Investors must watch out for TCV for the quarter; deal momentum, tenure and pricing; commentary by segment, particularly on Retail, Financial Services and Communication; and commentary on client budget for CY22. “For Infosys, we would keenly watch out for movement in attrition, a key variable in our view,” it added.

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