Infosys share price rose 1 per cent in the early trade on Wednesday (13 April) ahead of the company’s fourth quarter results scheduled to be announced later today. The IT major is expected to post a 15-20 per cent rise in consolidated profit after tax and a 24 per cent growth in consolidated revenue in the quarter ended March. Margins are likely to expand aided by higher off shoring and favourable currency mix, said experts. Additionally, new deal ramp up, employee addition and visibility will remain the key factors going ahead. The stock was last quoting at Rs 1,748, up 0.35 per cent on the National Stock Exchange (NSE). The share is currently trading 10.32 per cent below its 52-week high of Rs 1,953.70, touched on 17 January.
EBIT margins may dip 35 basis points
The robust demand outlook for the IT sector remains intact. “We believe headwinds like high inflation in developed markets forcing higher-than-usual salary hikes for onsite employees, resumption of travel and higher visa costs would only be partly negated by tailwinds like improved pricing and currency depreciation,” said Nomura. EBIT margins for Infosys may dip 35 basis points when compared to the previous quarter, Nomura added. The company has seen momentum in financial services, retail, communication, energy, and manufacturing sectors. ICICI Direct is expecting a net profit improvement of 1.9% on-quarter while HDFC Securities said it may improve by 0.8% to Rs 58.55 billion.
Ramp up of Daimler deal, traction in digital technologies among key factors to watch
Brokerage firm Sharekhan believes Infosys would provide a revenue growth guidance of 11-13% for FY23 versus 12-14% at the beginning of FY22. It expects Infosys to retain its margin guidance for FY23 at 22-24%. Investors will watch out for commentary on the mix of deal sizes, deal total contract value (TCV), deal closure momentum, and deal pipeline. Ramp up of Daimler deal and traction in digital technologies will be among the key factors to watch, according to ICICI Securities.
Attrition rate likely to be high
While the peak might be behind, the war for talent and shortage of skills is expected to keep Infosys’ attrition high. The attrition rate at Infosys rose to 25.5% in the December quarter from 20.1% in the preceding three months. “Attrition across companies would continue to be high and, hence, cost to backfill attrition (at higher costs) and costs related to retention, bonus, rationalisation of compensations are expected to put pressure on margins,” according to ICICI Securities.
Infosys had posted a profit of Rs 5,076 crore and revenue of Rs 26,311 crore in the quarter ended March 2021. Profit in the three months ended December 2021 was Rs 5,809 crore and revenue was Rs 31,867 crore.
