Web analysis | Infosys: To guide or not to guide?

Given the importance of Infosys' guidance, any change from this tradition can seriously impact share prices of the entire IT sector

The results season is generally flagged off by Infosys announcing its numbers with focus being on guidance. Infosys’ guidance is considered as an inside view in not only the developments in the IT world but also indicates the state of affair in various economies. Their visibility or lack of it re-rates the entire sector.

Given the importance of Infosys’ guidance in the context of Indian markets, any change from this tradition can have a serious impact on share prices of the entire sector.

For the first time since the company started announcing its guidance, the market is talking of the company discontinuing the same. Though none of the analysts think this is likely, the fact that they have mentioned it in their reports indicates there were some talks on the issue. JP Morgan has, in fact, titled its result pre-view as ‘To guide or not to guide? We think this debate should really be a non-debate’. UBS too has a similar headline to its report.

To put it simply more than the profit numbers, the fact that the company is continuing with its guidance will be at centrestage when the company announces its results on Friday, April 12.

Here is a sneak preview on the points one needs to look at in Infosys’ results.

• Consensus estimate of net profit for the year is expected to grow at 23% to Rs 8,322.45 crore.
• This would result in a consensus EPS of Rs 145.65 the magic figure to watch out for at the time of results. The stock can post a decline even if the above number is achieved. However, the final trend will be decided only after guidance is announced (if at all).
• Sales are expected to grow by 24% to Rs 34,267.72 crore.
• Guidance to the US Dollar is the key. Consensus is that Infosys might give a guidance of 12-14% growth.
• There is a likelihood of a special dividend announcement, keeping in line with the company’s policy of announcing one every 2 years. The company is sitting on a cash pile of Rs 22,100 crore.

Analysts will be benchmarking the company’s guidance with respect to that announced by 11-14% export guidance for the IT sector announced by Nasscom. Any upward variation in the guidance will be positive for the stock, as most of the analysts are pessimistic on the numbers. Despite this, as per Bloomberg 45 analysts have a ‘Buy’ recommendation, 20 have ‘hold’ and five have a ‘sell’ call on the company. 

WHAT THE BIG GUYS ARE SAYING ABOUT INFOSYS
	UBS	JP Morgan	Barclays	Jefferies	Consensus
Net profit	8,277.10	8,392.10	8,398.70	8,267.60	8,322.45
EPS (Rs)	144.85	146.15	147.00	144.69	145.65
Revenue	34,088.40	34,270.50	34,111.80	33,907.90	34,267.72
Figures in Rs cr, unless indicated