Infosys trades firm post September-quarter earnings

Infosys was trading firm at Rs 938, up 1% on BSE at 10:25 AM; after the company delivered in-line financial performance for the quarter ended September, 2017 (Q2FY18).

The stock hit an intra-day high of Rs 944, bouncing back 3% from its early morning low of Rs 915 on the BSE. A combined 3.63 million shares changed hands on the counter on the BSE and NSE so far.

Infosys said second-quarter profit grew 7% to Rs 3,726 crore on quarter-on-quarter (QoQ) basis, beating average analysts estimates of Rs 3,491 crore in Q2FY18. Revenue grew 2.9% to Rs 17,567 crore on sequential basis.

Infosys however, cut its growth forecast for the year ahead by 200 basis points, much steeper than estimates, citing a weak second half of the financial year.

Analyst at Antique Stock Broking recommends buying on the stock in any correction driven by guidance cut.

“Infosys 2QFY18 performance was broadly in-line but the cut in FY18 guidance was higher than expected. The constant currency (CC) revenue growth of 2.2% QoQ is in-line with our estimates but below consensus expectations of 2.7%. Earnings before interest and tax (EBIT) margins at 24.2% were 80bps ahead of consensus estimates,” the brokerage firm said in Q2FY18 result preview.

2QFY18 performance is heartening in this context with growth in all verticals and geographies (barring India). Review of strategy by the board and management team has reasserted the existing strategic direction with a sharper focus and accelerated execution. We now factor in return to stability for the company and revise up FY18/19 EPS estimates by 2%/8%, driven largely by margin upgrade, it added.

Analysts at Emkay Global Financial Services however, curtailed growth/profitability estimates marginally to account for lowered guidance and likely continuous weakening of deal success ratio vis-à-vis peers such as TCS/Cognizant and believe Infosys should be avoided despite attractive valuation.

“We believe that the traction in large deal TCV (down in H1FY18 by 31% yoy) and business momentum in top accounts (top 10 clients revenue down 5.7% yoy) would remain soft in the absence of a thought leader (CEO). We also see the lowered growth expectation impacting profitability in the absence of any further efficiency levers, weak INR realization, increased investment intensity (reskill, onsite hiring) and unfavourable operating leverage,” the brokerage firm said result update and reiterate ‘hold’ rating on the stock.