Infosys Q4 Results Review - Unexpected Pain Continues, Miss Guidance Again, FY25 To Be Muted: Dolat Capital

Dolat Capital Report

Infosys Ltd. reported constant currency revenue decline of 2.2% QoQ (below our estimate of +0.1%), due to rescoping of contract impacting 100 basis points. Operating profit margin stood at 20.1% down 40 basis points QoQ (our estimate: 20.7%) led by-

1. one-time re-negotiation contract (-100 bps),

2. wage hike and Visa costs (-80 bps) partially offset by lower provision (+40 bps),

3. Project Maximus (+40 bps) and

4. reversal of cyber incident (40 plus bps).

Infosys guided CC revenue growth of 1-3% for FY25E (FY24: 1.4%) excluding revenue contribution from in-Tech acquisition (100 bps) and expects better H1 growth over H2. OPM guidance stood at 20-22% (FY24: 20.7%).

We tweak our FY25/FY26E earnings per share estimates by -0.6%/-1.9% to factor continued stress in client spends. Despite record mega deal wins, uncertain discretionary spending in near term may impact business performance. Maintain ‘Reduce’ rating with target price of Rs 1,470 (d at 21 times FY26E).

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