India’s second largest IT services company, Infosys reported a 1.7% fall in its consolidated net profit for Q3FY24 to ₹6,106 crore from ₹6,212 crore in Q2FY24. The company’s revenue during the quarter fell by 0.4% to ₹38,821 crore from ₹38,994 crore, QoQ. Its revenues in constant currency (CC) terms also declined to $4,663 million.
Operating margin for the quarter came in at 20.5%, down 70 bps QoQ and 100 bps YoY. Large deal TCV for the quarter was $3.2 billion, with 71% being net new. Meanwhile, attrition declined further to 12.9%.
Infosys narrowed its revenue growth guidance to 1.5% – 2% for FY24 from 1% – 2.5% earlier, while maintaining the margin guidance unchanged to 20-22%.
Also, the company announced a definitive agreement to acquire InSemi, a leading semiconductor design and embedded services provider for ₹280 crore.
Analysts remain optimistic on Infosys growth outlook with some brokerages raising the target prices on the Infosys shares.
Also Read: TCS vs Infosys: 5 most important comparisons you should know
Here’s what brokerages have to say on Infosys Q3 results:
Jefferies
Infosys’ Q3 growth and margins beat estimates. Net new order book of $2.2 billion was impressive, according to Jefferies. Strong deal wins provide comfort on expectation of 13% EPS CAGR over FY24-26E, said the foreign brokerage.
It raised estimates on Infosys by up to 2% to factor earnings beat and has a ‘Buy’ rating on the stock with a target price of ₹1,740 per share.
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Nuvama Institutional Equities
According to Nuvama Institutional Equities, Infosys reported decent results after back-to-back disappointments. Deal wins, while modest, had a high share of net new (71%), which should boost growth for FY25 and beyond.
“We see Q3FY24 to be the bottom for the earnings downgrade cycle for Infosys and the sector. We have stayed positive on the sector through the year, and expect the strong deal wins of the last few quarters to gradually convert into revenue in coming quarters, even as the US macro becomes favourable. Over the last six months, Infosys has significantly underperformed peers and is now trading at attractive valuations versus TCS and HCL Technologies,” Nuvama Equities said
The brokerage firm upgraded FY24, FY25 and FY26 estimates by -0.3%, +1.3% and +2.2%, respectively and continues to value Infosys at 24x FY26 PE. It maintained a ‘Buy’ rating on the stock and raised the target price to ₹1,850 per share from ₹1,800 earlier.
Catch Wipro Q3 Results Live Updates here
Antique Stock Broking
Antique Stock Broking believes Infosys’ deal momentum should be strong in FY25 and revenue growth should improve to high single digits in CC terms.
“Margin outlook has improved as the company was able to reduce employee and subcontracting costs. In addition, the margin improvement plan continues to gain traction, with management expecting further benefits from operating efficiencies going ahead. Overall, while 3Q results are in line with expectations, we increase our margin assumptions slightly leading to a 2%/ 3% increase in our FY25 / 26 EPS,” said the brokerage.
It maintained a ‘Hold’ rating on the stock and increased target price to ₹1,675 per share from ₹1,625 earlier.
Phillip Capital
Phillip Capital increased its FY25-26 PAT estimates marginally by 0-1% for Infosys. It now forecasts CC revenue growth of 1.7%, 6.3%, 9.6% with 21.0%, 21.3% and 22.0% EBIT Margins in FY24, FY25 and FY26.
The brokerage upgraded its target multiple to 22x FY26 EPS (20x earlier) on expectation of growth revival starting H1FY25. It upgraded the ratings on the stock to ‘Buy’ and raised the target price to ₹1,690 per share from ₹1,520 earlier.
Read HCL Tech Q3 Results Live Updates here
Emkay Global Financial Services
Infosys reported a tad better-than-expected operating performance for Q3. We expect growth to accelerate in FY25 on account of ramp-up of large deals, strong deal pipeline, and expected recovery in discretionary spending, said Emkay Global Financial Services.
The brokerage tweaks FY24-26 EPS estimates by under 1%, factoring in Q3 performance. It retained a ‘Buy’ call on the stock with an unchanged target price of ₹1,850 per share at 25x its Dec-25E EPS.
At 9:20 am, Infosys shares were trading 5.01% higher at ₹1,569.85 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 12 Jan 2024, 09:22 AM IST