Will Infy's FY14 numbers surprise analysts?

Here is what the brokerages expect the company to report while announcing its Q4FY14 and full year FY14 results on Tuesday

Narayana Murthy-led information technology major, Infosys, will announce its Q4FY14 and financial year 2013-14 results on Tuesday. The company had earlier lowered the outlook for Q4FY14 and early part of FY15, suggesting that Q4 growth could be at the lower end of the guided band.

However, foreign institutional investors (FIIs) are still bullish on the company with their stake in the country’s second largest software firm touching a record high of 42.10% in the January – March 2014 quarter despite the downward revision in result expectations.

The company has seen a slew of exits with their CEO and MD, SD Shibulal, who has sought an early retirement before his superannuation in March 2015.

So, what do brokerages expect from company as it announces its annual results (FY14) and fourth quarter (Q4FY14) results on Tuesday.

Credit Suisse

While the Mar-14 quarter is likely to be seasonally slow, Infosys' recent cautious stance and TCS' muted indications have prepared investors for this and we do not anticipate any negative surprise. We expect most companies to sound reasonably positive on the outlook for 2014. The cross-currency movement should also be in a narrow band for the quarter.

We believe street expectation for Infosys' FY14 revenue growth guidance is between 6 – 9% (assuming guidance is given) – a number lower than 6% will be a negative surprise. For the March 2014 quarter, we expect a sequential revenue growth of 0.5% (USD terms). Management has indicated that revenue would come in at the low end of its guidance of -0.4% to +1.4% growth. We expect margins to increase 50 bps (basis points) quarter-on-quarter (q-o-q) as the company's cost-cutting measures continue to bear fruit.

Motilal Oswal

Infosys lowered the outlook for Q4FY14 and early part of FY15, suggesting that Q4 growth could be at the lower end of the guided band. Post the weakened growth outlook of FY14 given by management; we expect USD revenue to be $2,106 million, 0.3% QoQ, and implying FY14 revenue growth of 11.7% to $8,263 million. We expect the company to start the year by guiding for 7-10% growth.

Prabhudas Lilladher

The management maintains a cautious stance, highlighting weakness in Retail and Hi-Tech verticals. However, the management is likely to sound more positive on early signs of discretionary pick-up.  We expect the management to guide for FY15 USD term revenue to grow at 6-9% year-on-year. We expect total contract value of deals signed in the quarter to exceed $500 million as deal closure improved in CY14.  Moreover, our interaction indicates improvement in deal pipeline for Infosys. We expect a commentary soon on the recent churn in the senior management.

Barclays

We expect USD revenues to decline by 0.4% q/q with its EBIT margin having improved by around 50bps q-o-q. Our revenue estimate tracks management's comments at our recent investor conference where it noted that 1) weakness in Hi-Tech and retail verticals and 2) delays in project ramp-ups likely led to a slowdown in Q4FY14. We expect management to remain conservative on revenue traction over 1HFY15 and believe that the FY15 revenue growth guidance could be c8% y/y.

Edelweiss Capital

Infosys had earlier cautioned investors on weakness in hi-tech and retail verticals which could impact near-term growth. Based on this, we expect the company to guide for 7-9% revenue growth. We believe this will be a conservative guidance given that it needs a CQGR of mere 1.8-2.5% to achieve it. Infosys had revised its guidance upwards twice in FY14 riding improved demand. This could play out in FY15 too given the demand scenario is much better in FY15 versus FY14.

IDBI Capital

We expect Infosys to guide 5-7% US$ revenue growth for FY15, implies CQGR of 1.5 to 2%. 2) Commentary on CY14 IT budget, 3) Wipro’s Q1 guidance (1.5-3.5% IDBIest), 4) Commentary on US, BFSI and discretionary spending, 5) Outlook in Europe and outsourcing trend, 6) Update on troubled verticals - Retail, Telecom and Hi-tech verticals, 7) Large deal pipeline and conversion rate, 8) Pricing environment, 9) Hiring target for FY15, trends in attrition and utilisation and 10) Quantum of wage hike.

Angel Broking

Indian IT companies are expected to witness a marginal decline on the operating margins front due to slight INR appreciation as well as relatively subdued volume growth expected during the quarter. We expect the EBITDA margin of Infosys to decline by 30bp qoq to 27.5% on account of slowdown seen by the company in spending by customers in hi-tech and retail & CPG verticals and random project cancellations which are expected to have hurt overall volume growth.

Sharekhan

We expect Infosys to report a 0.4% quarter-on-quarter (Q-o-Q) growth in revenues Cross-currency movement to positively impact revenues by 10 basis points (BPS). The EBITDA margin is expected to remain stable; benefits from cost optimisation initiatives are offset by the negative impact of the 1% appreciation in the rupee against the dollar during the quarter. Net income is expected to post a 1.6% Q-o-Q decline driven by a lower other income (last quarter foreign exchange [forex] gain was Rs119 crore). We expect Infosys to guide for a 6-10% revenue growth for FY2015.