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  • 18 Apr 2022
  • ICICIdirect Research

Infosys reports weak Q4; strong FY23 revenue guidance

INFY - 1939 Change: -11.50 (-0.59 %)

News: Infosys reported weak Q4 numbers. It reported 0.7% QoQ/18.5% YoY dollar revenue growth to US$4,280 million.  In CC terms, it reported growth of 1.2% QoQ and 20.6% on a YoY basis. Reported EBIT margins declined ~200 bps QoQ to 21.5%, EBIT margin walk as follows: i) there was an impact of (-160 bps) on lower calendar days and contractual provisions, ii) (-60 bps) on lower utilization, iii) (-100 bps) due to higher visa costs and third party costs, which were mitigated by (+110bps) salary related benefits. Attrition was at 27.7% on LTM basis, however it was down on quarterly annualized basis by 500bps. The company added record 21,948 employees in Q4 taking its total base to 314K in FY22.

Views: Infosys’s performance in Q4 was weak , both on revenue growth and margin. However performance in FY22 was in line with guidance provided as the company ended FY22 with revenue growth of 19.7% in CC terms vs guided range of 19.5-20% and EBIT Margin of 23% vs guided range of 22-24%. The revenue guidance of FY23 reflects the strong demand momentum for the company . On Margin front, the company’s guidance cut of 100bps both on higher and lower end vs FY22 reflects the cost pressures but it also includes one-time investments on cloud and digital side which is non-recurring in nature. We believe that EBIT margin guidance might be back to 22-24% in FY24. Quarterly annualized basis attrition has come down which also gives us comfort for FY24 numbers

Impact: Negative