- 25 Jul 2022
- ICICIdirect Research
Infosys increased revenue guidance for FY23, Margins will be at the lower end of the guidance bandINFY - 1428 Change: 44.40 (3.21 %)
News: The company’s revenues increased by 5.5% QoQ and 21.4% on YoY in CC terms ( strongest amongst peers as TCS/HCL tech/Wipro reported 3.5%/ 2%/2.1%). Dollar revenues increased by 3.8% QoQ to US$4,444 million while Rupee revenues were up 6.8% QoQ to Rs 34,470 crore. It reported EBIT margin of 20.1% , down 150bps QoQ due to i) (-160bps impact) of wage hike ii) (-40bps impact) on lower utilisation iii) (-30bps impact) on higher subcontractor costs. Revenue growth was across geographies & verticals. In terms of geographies in CC term, revenue growth was led by Europe which grew by 33.2% YoY, followed by North America which grew by 18.4% YoY in CC terms. In terms of verticals the growth was led by BFSI, Retail, Communication, which grew 12.1%, 17.8% and 30.0% YoY in CC terms. Digital revenues now forms 61% of the revenue mix grew by 7% QoQ/32.8% YoY. The net addition continue to be strong at 21,171 employees taking its total headcount at 3,35,186. LTM attrition increased by 70bps QoQ to 28.4%. Large deal TCV however was down 26.1% QoQ/34.6% YoY to US$1.7bn.
Views: The company’s revenue performance was better than expected and increase in revenue guidance is encouraging ( we do not expect further increase in revenue guidance). The company sees demand environment continue to robust but indicated some impact of recession in few pockets i.e BFSI vertical. Margins are expected to recover in subsequent quarters however management indicated that margins will be at the lower end of the guidance band which reflects continued cost pressures . The pace of attrition is also slowing down which is expected to support margins in the medium term as attrition on quarterly annualised basis is down QoQ. Utilisation has been on down-ward trend, but we believe as in when fresher’s which acquired in FY22 becomes billable, it is expected to improve going forward. The company maintained guidance of 50,000 fresher hiring in FY23 ( on the base of 84,000 fresher hired in FY22). Large deal TCV was under pressure ( was also visible in TCS), however it also could be also because of structural change of nature deals in the market as clients are slicing large deals into medium & smaller ones, we seek more clarity of the same.