Infosys Q3 Results Review - Guidance Implies Soft Q4; Signs Of Macro Slowness Discerning: Dolat Capital

Dolat Capital Report

Infosys Ltd. reported revenue growth of 2.4% QoQ in constant currency terms (our estimate: 1.3%), led by retail at 3% QoQ, manufacturing at 6.3% QoQ and energy, utilities and resources growing 8.1% QoQ, in U.S. dollar terms. Banking financial services and insurance witnessed 1.7% QoQ decline in U.S. dollar terms due to furloughs and project specific closures. 

Operating profit margin declined 4 basis points QoQ at 21.5% (our estimate: 21.9%), with contribution from forex (up 40 bps), cost optimisation (up 70 bps), offset by 30 bps selling, general and administrative cost and 80 bps impact from seasonal weakness/furloughs.

Infosys raised its FY23 rev growth guidance band from 15-16% to 16-16.5% in CC terms(implies ~1% QoQ growth in Q4), while OPM was retained at 21-22%, though management expects to achieve lower end of OPM guidance.

We remain cautious on macro environment going into FY24, although its dealwin trajectory and commentary provides comfort.

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