Infosys Q4 Preview:PAT likely to grow marginally, margin may remain steady; all eyes on FY25 guidance

After TCS came in with better-than-expected Q4 numbers on deal wins, Bengaluru-headquartered IT major Infosys is slated to report its March quarter earnings on April 18 (Thursday).

Similar to TCS, brokerages also envision margin expansion for Infosys by a marginal quantum amid lower operating  expenses. Axis Securities expects the company to report revenue growth of 0.3 per cent sequentially. Also, at the same time, the company’s management is seen to give a revenue growth guidance of 4.5-6 per cent for FY25E. Zee Business research desk estimates EBIT margin during Q4 at 20.7 per cent as against 20.5 per cent in the preceding quarter.

Further, the desk estimates a sequential decline in revenue by as much 0.7 per cent to Rs 38,550 crore as against Rs 38,821 crore during the previous quarter. This is primarily due to the delay in the ramp-up of large deals. Also, the company’s dollar revenue is foreseen to witness a degrowth of 0.6 per cent.

Profitability, however, is seen to log 1.9 per cent growth sequentially and come in at Rs 6220 crore.

HDFC Securities, on the other hand, expects the IT major to post steady growth, during the review period. Further, it estimates the company to guide for 3-5 per cent for FY25E. 

BoB Capital Markets held that the IT services provider focuses more on margin on the back of subcontracting, SG&A (Selling, general and administration) utilisation, onshore/offshore mix and pyramid optimisation. 

IDBI Capital on the back of lower furloughs, higher working days and utilisation expects revenue growth during Q4 by 0.5 per cent in constant currency (CC) terms and cross currency tailwind of 27 bps. 1 basis point is one-hundredth of a percentage point. Nonetheless, the desk estimates a decline in CC revenue by 1 per cent.

Similarly, EBIT margin is viewed to climb by 16 bps in Q3FY24 to 20.7 per cent during the period. 

BoB Capital Markets expects Infosys to benefit from the interest rate cut expected by the US Federal Reserve in CY24. Further it assumes coverage on the stock with a ‘hold’ view and target of Rs 1592 ((P/E of 21.2x for FY26E, ~20% discount to TCS).

Key monitorables 

The key watch-outs for shareholders are deal total contract value (TCV), pricing scenario, attrition, outlook on growth, margins and days sales outstanding (DSO) day. Other major attributes to keep an eye on are ramp up of large deals; trend in discretionary spends; trends in Generative AI;  margin outlook; and outlook on telecom, retail, BFSI & Hi tech verticals, impact on revenues due to leadership changes; outlook on conversion of pipeline and project run offs, hiring& utilization outlook, budget trends and FY25E guidance.