Infosys' Q4FY16 results: Key expectations

Here's a quick compilation of what analysts from top research and brokerage houses across the country expect from the IT heavyweight

Infosys has seen a steady rise and has outperformed the markets thus far in calendar year 2016 (CY16), with the stock rallying nearly 6.3% to Rs 1,175 levels by close of trade on Wednesday. By comparison, the Nifty has slipped 1.2% during this period.

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The information technology (IT) company is scheduled to announce financial results for the fourth quarter (Q4FY16) and year ended March 31, 2016 (FY16) on April 15, 2016. Here's what analysts from top research and brokerage houses across the country expect:

NOMURA

We expect Infosys to guide FY17F USD constant currency revenue growth for 11-13%. Key factors to watch would be: 1) any signs of stability in pricing, 2) sustenance of the near $1 billion deal wins (announced in 2Q) and its translation into revenues, and 3) sustained momentum in larger segments. Lower–than–expected guidance and moderation in margins could be taken negatively. 

While street expectations of around 13% y-o-y USD revenue growth in FY17F and margin improvements look a tad aggressive to us, we still expect Infosys to outperform TCS on revenue growth in FY17/18F.

EDELWEISS

Though the second half (H2) for Indian IT large-caps like Infosys and TCS is generally weak, we anticipate modest quarter-on-quarter (q-o-q) revenue growth in Q4FY16 given absence of the Chennai flood loss and 1 additional day in February. We believe Infosys’ revenue guidance will beat even most optimistic estimates and be higher than Cognizant’s as well for FY17 at 12-14% in constant currency terms. 

Also, despite apprehension on Infosys’ margin due to caution raised earlier by management, we believe it will expand 120 basis points (bps) during the quarter as well and we expect commentary to imply improving margin.

MOTILAL OSWAL

Infosys raised its FY16 guidance in the previous quarter to 12.8-13.2% y-o-y (constant currency), from 10-12% earlier. This implies 4Q guidance of 1-2.4% q-o-q (constant currency). We expect revenue to grow 2.1% q-o-q (CC), which would represent the strongest Q4 for Infosys in the last six years. In INR terms, our revenue growth estimate is 4.2% q-o-q on the back of around 2.3% sequential depreciation in INR v/s USD. We also expect deals wins to improve compared to Q3, given delays in signing of some deals in the previous quarter. We expect EBITDA margin to expand 20 basis points (bps) q-o-q to 27.4%. The factors that we expect to play on margins are INR depreciation, improved utilisation, and pricing pressure. The stock trades at 17.7x FY17E and 15.8x FY18E earnings. Buy.

IIFL

We believe that Infosys’s constant currency (cc) dollar revenue growth in FY16 could surpass the upper end of its guidance of 12.8?13%. This is expecting 2?2.5% constant currency q-o-q growth in Q4FY16, which is quite plausible given impressive outcome from the new strategy in terms of improving wallet share and deal signings. For FY17, we estimate the management to guide for similar to FY16 growth i.e. within the range of 12?14%.

PRABHUDAS LILLADHER

Infosys is expected to report sector leading y-o-y growth in Q4FY16 and guide for above industry growth in FY17. Our channel checks indicate healthy deal pipeline and a significantly better win rate in large deals. Infosys is in the midst of an earnings upgrade cycle and that should drive premium valuations and stock performance.

We expect Infosys to report Q4FY16 constant currency revenue growth of 2.3% q-o-q, best ever Q4 in several years. Infosys’ Q4FY16 y-o-y constant currency revenue growth will be 15.4% against 7.8% in Q4FY15 indicating sharp improvement in growth trajectory. We expect Infosys to guide for FY17 CC revenue growth of 12?14%.

EXPECTATIONS FROM Q4FY16
	Revenues	EBITDA	PAT
Edelweiss	16,633	4,724	3,696
Prabhudas Lilladher	16,576	4,458	3,445
IIFL	16,602	NA	3,555
Emkay	16,726	4,620	3,526
Axis Capital	16,387	4,076	3,488
Source: Research reports; All figures in Rs crore