Will the earnings beat analysts’ estimates? Here is what Citi, Macquarie, BofA, Kotak Securities expect ahead of Infosys Q2 FY21 earnings:-
 
Citi expects dollar revenue growth of 3.7% (QoQ) to $3235 mn in Q2 FY21 vs $3121 mn in Q1 FY21 and improve 0.8% (YoY) from $3210 mn in Q2 FY20. Revenue in rupee terms will improve 1.2% (QoQ) to Rs 23,939 cr from Rs 23,665 cr and will grow 5.5% from Rs 22,629 cr (YoY). EBIT margin will recover 32 bps to 23% from 22.7% (QoQ) and 129 bps from 21.7% (YoY). Profit is expected to improve 5.6% (QoQ) to Rs 4470 cr from Rs 4233 cr and 11.2% from Rs 4019 cr (YoY). Sequentially, CITI expects revenue growth of 2.3% (QoQ) in CC terms ( 140 bps cross currency benefit) and higher margins (QoQ). Kaleidoscope Innovation acquisition will be integrated this quarter however overall contribution will be immaterial. Demand commentary and deal wins will be key to watch out for, given macro uncertainty. CITI anticipates a strong TCV (Total contract value) number. Also, FY21 growth & margin outlook, BFSI and Retail commentary should be monitored closely.
 
Macquarie expects dollar revenue growth of 4.5% (QoQ) to $3261 mn in Q2 FY21 from $3121 mn in Q1 FY21 and grows by 1.6% (YoY) from $3210 mn in Q2 FY20. In CC terms, this would translate to 2.9% (QoQ) and 0.4% (YoY). Revenue in rupee terms will improve 3.4% (QoQ) to Rs 24,461 cr from Rs 23,665 cr and grow 8.1% (YoY) from Rs 22,629 cr. Infosys EBIT margin will remain flat at 22.7% (QoQ) and will improve 100 bps from 21.7% (YoY). Profit is expected to improve 10.2% (QoQ) to Rs 4665 cr from Rs 4233 cr and to improve 16.1% from Rs 4019 cr (YoY).
Macquarie says key things to watch out for would be-
1) Deal booking and pipeline
2) Commentary on demand by verticals, in particular BFSI and retail
3) Medium-term demand outlook including vendor consolidation
4) Outlook on higher outsourcing and offshoring potential post the pandemic
5) Pricing outlook
6) Ramp up of recently won large deals
 
BofA expects dollar revenue to grow 4.8% (QoQ) to $3269 mn in Q2 FY21 and to grow 1.8% (YoY). Revenue in rupee terms will improve by 2.2% (QoQ) to Rs 24,193 cr and improve 6.9% (YoY). In CC terms, this would translate to 200 bps improvement. EBIT margin will sequentially reduce by 16 bps to 22.5% and will improve by 80 bps (YoY). Profit is expected to improve 5% (QoQ) to Rs 4432 cr and improve by 10% (YoY).
 
Kotak Sec expects $ 3210 mn Revenue which is 4% higher than last quarter (QoQ) and 1.1% higher than last year (YoY). Margins are expected to come in at 22.7% which is 5 bps more than last quarter (QoQ) and 102 bps more than last year (YoY). The profit is expected to be around Rs 4409 cr which is 3.2% higher than last quarter (QoQ) and 9.2% higher than last year (YoY).
 
CLSA expects $ 3239 mn Revenue which is 3.8% higher than last quarter (QoQ) and 0.9% higher than last year (YoY). Margins are expected to come in at 22.8% which is 14 bps more than last quarter (QoQ) and 111 bps more than last year (YoY).  The profit is expected to be around Rs 4444 cr which is 5% higher than last quarter (QoQ) and 10.6% higher than last year (YoY).
 
Nomura expects $ 3266 mn Revenue which is 4.7% higher than last quarter (QoQ) and 1.8% higher than last year (YoY). Margins are expected to come in at 22.6% which is 10 bps lower than last quarter (QoQ) and 90 bps more than last year (YoY). The profit is expected to be around Rs 4528 cr which is 7% higher than last quarter (QoQ) and 12.2% higher than last year (YoY).

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Nomura says focus should remain on growth:
1) Ramp up in the Vanguard deal (clearly it will be everything related to Vanguard that will drive growth for Infosys)
2) Improving traction in demand especially in BFSI, Telecom and Hi-Tech.

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Ambit expects Infosys to narrow its FY21E revenue guidance range to 1-2% YoY growth (vs 0-2% earlier) and retain EBIT margin guidance of 21-23%. Outlook on demand, especially BFSI / Retail which constitutes 46% of revenue for Infosys and indications of wage hikes will be key to watch.

(Authored by Rahul Kamdar)