Infosys Q4FY22 Results Preview: IT major likely to report stable earnings, margins may see minimal pressure

Information and Technology (IT) major Infosys is scheduled to report neutral quarterly earnings in the fourth quarter of the financial year 2021-22 (Q4FY22), Zee Business research report said. The margins of the company may see minimal pressure, while the top and bottom lines may grow. 

According to senior research analyst Kushal Gupta, “Infosys numbers are likely to be good, with margins being stable but sequentially below, and see around 3.3 per cent growth in constant currency (CC) in the March-end quarter of the financial year of 2021-22.” 

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The revenue in terms of dollars to grow around 3 per cent to $438 crore in QFY22, as compared to $425 crore in a year-ago quarter, the analyst said in its report. The key monitorable will be order book, commentary on demand, and overall FY22 performance, Gupta added.  

In line with the Zee Business research report, several brokerages also estimated Infosys to report marginally positive Q4 results on Wednesday. In this regard, domestic brokerage firm ICICI Direct expected Infosys to register 3 per cent QoQ (quarter-on-quarter) growth in CC led by momentum from financial services, retail, communication, energy, and manufacturing.  

Cross-currency headwinds would lead to 2.7 QoQ growth in the dollar term. Rupee revenues to increase by 3 per cent QoQ. EBIT margins are expected to contract 30 basis points QoQ due to a rise in employee costs, while the profit may improve by nearly 2 per cent QoQ, the brokerage also said. 

“Some colour on demand environment in FY23E with guidance on revenue and margin for the next year, vertical wise commentary, a ramp-up of Daimler deal, traction in digital technologies and pricing environment – shall be the key monitorable,” ICICI Direct said. 

Similarly, JM Financial is building in a 3 per cent QoQ CC revenue growth with around 40 bps cross-currency headwinds translating into a 2.6 per cent QoQ in dollar revenue growth and estimated stable EBIT margins at 23.4 per cent for 4QFY22.  

On key monitorable, JM Financial said, “FY23 revenue guidance – expect Infosys to guide for a 12-14 per cent year-on-year CC revenue growth; FY23 margin band – expect to guide for 100 bps dilution in the margin band due to margin pressures from the resumption in travel and pricing trends along with supply-side industry dynamics.” 

Meanwhile, Arihant Capital in its Q4 preview expected net revenue of Infosys may grow at 2.4 per cent QoQ due to a high base effect in Q3FY22, while EBIT margin is expected to contract by 44 bps in Q4FY22 led by higher visa cost and supply-side. 

According to Arihant key things to watch are, steps taken to manage supply-side challenges and available levers to defend margins and demand environment in BFSI, Manufacturing, Retail, and Communications, pricing environment. Deals pipeline and deal closure momentum.