Infosys Ltd is all set to announce its December quarter results on Thursday, alongside with Tata Consultancy Services Ltd (TCS), post market hours. The second largest IT major is expected to report 5-8 per cent year-on-year (YoY) drop in profit on a flattish sales in a seasonally weak quarter, due to high furloughs and lower revenue pass-through. Ebit margin is seen falling both sequentially and on yearly basis, thanks to the impact of two months of wage hikes.
A few analysts fear Infosys may further lower its FY24 for the third straight time, having lowered guidance to 1-2.50 per cent post September quarter results from 1.35 per cent at June end and 4-7 per cent at the end of FY23. A majority though believe the FY24 guidance will be retained.
Emkay Global said the Bengaluru-based IT firm can narrow its revenue growth guidance range to 1-2 per cent in constant currency (CC) terms CC YoY, while retaining the 20-22 per cent Ebit margin range. It expects investors to watch out for management commentary on early conversations with clients and expectations on the 20 24 IT budget and factors leading to termination leading to termination of the $1.5 billion deal win where it was a due to competition or change in spending priority by client.
This brokerage sees Infosys' profit falling 7.5 per cent to Rs 6,091 crore on 0.8 per cent rise in sales at Rs 38,632 crore. Ebitda margin is seen falling 113 basis points YoY and 90 basis points QoQ to 24.4 per cent, it said.
"We expect CC revenue decline of 1.6 per cent QoQ. We don’t expect recent large deal wins to contribute meaningfully as ramp ups remain weak. Growth to be impacted due to furloughs, weakness in discretionary spending and cautious sentiment across major verticals," PhillipCapital said.
Also read: Infosys shares in focus as IT firm loses $1.5 billion AI contract
This brokerage expects margins to be hit 110 bps due to two months of wage hikes impact in the quarter and furloughs but expects Infosys to retain its margin guidance of 20-22 per cent and sales guidance in FY24. PhillipCapital sees profit falling 5.3 per cent to Rs 6,239 crore.
Infosys deal total contract value (TCV) stood at $7.7 billion in the September quarter and $2.3 billion in the June quarter. Nirmal Bang Institutional believes that the December quarter TCV number will moderate as the second quarter saw multiple large deal signings which was not been replicated in the December quarter.
"Also, third-party items in the P&L statement will be keenly watched as these have been much higher compared to peers (6-7 per cent run-rate) and have been margin dilutive for the company," it said.
Axis Securities sees Infosys' profit dropping 8.7 per cent to Rs 6,010 croe; sales flattish at Rs 38,945 crore.
Infosys' will host a press conference at 4:30 pm IST and a 60-minute conference call at 6:30 pm, where its senior management will discuss company's performance and answer questions from participants.
Also read | Top 5 stocks to watch on January 10, 2024: Polycab India, Cochin Shipyard, Lupin and more
Also read: Cochin Shipyard shares zoom 19% post stock split; key technical levels to watch