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Infosys Q2 preview: Revenue could rise by up to 26% YoY; share buyback eyed

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Analysts expect Bengaluru-based IT major to deliver the highest revenue growth among large-sized peers for the July-September quarter (Q2FY23).


Brokerages see healthy yearly (YoY) revenue growth of 23-26 per cent at around Rs 36,672 crore in Q2 aided by sustained momentum in digital programs, and deal wins.


The company’s margins are expected to improve by around 30 basis points (bps) on a quarterly basis (QoQ) to 20.3 per cent vs 20.1 per cent in Q1FY23 and 21.5 per cent in Q4FY22. This will likely be due to operational efficiency and improved pricing, analysts said.


Besides, as per an average of six estimates, the company’s net profit could rise as much as 18 per cent from last year to roughly Rs 5,960 crore.


Most brokerages expect to maintain its 14-16 per cent constant currency (CC) growth guidance and 21-23 per cent margin guidance for FY23.


Key monitorables: FY23 guidance, the quantum of share buyback, execution of large deals especially in the manufacturing vertical, demand outlook, deal pipeline, likely furloughs in Q3, pricing leverage if any, hiring trends and attrition rates.


Here’s an overview of brokerage expectations:


Jefferies: The brokerage expects the company to report a 4 per cent quarterly CC revenue growth on deal ramp ups and seasonal strength. Its Ebit margins are estimated to expand 30 bpsQoQ driven by pyramiding, operating leverage and pricing benefits amid supply-side pressures, higher costs and continued investments in growth.


HSBC Global: The brokerage expects a 4.5 per cent QoQ CC revenue growth in Q2 with a 120 bps cross-currency negative impact due to a strong dollar. Its margins are likely to improve sequentially by 30 bps as the bulk of wage hikes were taken in Q1 whereas the impact of wage hikes for senior management and minor operational gains will largely offset each other.


Kotak Institutional Equities: It has forecast a 4.7 per cent CC sequential revenue growth. The pass-through element could stay elevated as mega-deals ramp up further, it said. A 20 bps sequential increase and 320 bps YoY decline in Ebit margin are estimated. Margins in the manufacturing vertical are expected to have declined by over 1,390 bps YoY making up for 150 bps of the 320 bps overall EBIT margin decline. The manufacturing margins, however, are expected to improve in Q2 from Q1.


PhillipCapital: It has estimated a 5.3 per cent CC revenue growth with a 30 bps expansion in EBIT margins due to the absence of salary hikes, and rupee depreciation.


IDBI Capital: The brokerage has projected the highest revenue growth at 6.4 per cent in CC terms, which it expects to be partially offset by a 120 bps cross-currency impact. It sees growth to have been broad-based with a large QoQ 155 bps EBIT margin expansion to 21.6 per cent led by better utilization, price hikes and reduced subcontracting cost.


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