- 12 Jan 2024
- ICICI Securities
Weak topline show as expected; One off impacts margins
INFY - 1465 Change: -7.30 (-0.50 %)News: Infosys reported revenue degrowth in a seasonally weak quarter while margin was impacted by one off and wage hike impact. Infosys reported revenue of US$4,663 decline of 1% QoQ & YoY while in dollar terms the terms revenue declined by 1.2% QoQ and was flat on YoY basis. Vertical wise Financial services, Communication & Hitech were laggards reporting YoY degrowth of 5.9%, 8% & 5.1% respectively in CC terms while Manufacturing & Lifescience vertical reported growth of 10.6% & 6.3%. Geography wise North America (59% of mix) declined by 4.9% on YoY basis in CC terms while Europe (28.2% of mix) grew by 5%. EBIT margin of the company declined by 70 bps QoQ to 20.5% due to the headwinds of salary hikes (70 bps) & one time impact of loss & revenue (60 bps) due to ransomware attack at subsidiary mitigated by the tailwinds of cost optimization program & currency benefit (60 bps). Large deal TCV came at US$3.2 bn, with ~71% being net new. The company’s total employees declined by 6,101 to 322,663 and attrition declined by 170 bps to 12.9%. The company narrowed its revenue guidance increasing the lower end by 50 bps while also reducing the upper guidance by 50 bps to 1.5-2% while it kept its margin guidance intact at 20-22%.
Views: : While topline weakness was visible, adjusting for one off impact and wage hike (impact for 2 months), the margins were relatively resilient indicating that the company’s margin improvement levers are bearing results. However, concern remains on revenue conversion front as narrowing the revenue guidance indicates clients are still remains cautious on the spending decisions. Clients budget closure ahead will be key which will indicate the demand for FY25.
Impact: Neutral
Infosys reported revenue degrowth in a seasonally weak quarter while margin was impacted by one off and wage hike impact. Infosys reported revenue of US$4,663 decline of 1% QoQ & YoY while in dollar terms the terms revenue declined by 1.2% QoQ and was flat on YoY basis. Vertical wise Financial services, Communication & Hitech were laggards reporting YoY degrowth of 5.9%, 8% & 5.1% respectively in CC terms while Manufacturing & Lifescience vertical reported growth of 10.6% & 6.3%. Geography wise North America (59% of mix) declined by 4.9% on YoY basis in CC terms while Europe (28.2% of mix) grew by 5%. EBIT margin of the company declined by 70 bps QoQ to 20.5% due to the headwinds of salary hikes (70 bps) & one time impact of loss & revenue (60 bps) due to ransomware attack at subsidiary mitigated by the tailwinds of cost optimization program & currency benefit (60 bps). Large deal TCV came at US$3.2 bn, with ~71% being net new. The company’s total employees declined by 6,101 to 322,663 and attrition declined by 170 bps to 12.9%. The company narrowed its revenue guidance increasing the lower end by 50 bps while also reducing the upper guidance by 50 bps to 1.5-2% while it kept its margin guidance intact at 20-22%.