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Infosys Q3 earnings on Friday; market awaits growth guidance, buyback plan

, ETMarkets.com|
Updated: Jan 09, 2019, 10.50 AM IST
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Highlights

  • Brokerages are not expecting any upbeat show from Infosys.
  • Sharekhan expects operating profit margin (OPM) of the company to slip 110 bps YoY.
  • Nirmal Bang expects revenue growth guidance to be maintained in 6-8 per cent range in CC terms.
NEW DELHI: Infosys, India’s second largest IT player in terms of revenue, may not post spectacular numbers for December quarter on Friday, but all eyes will be on it for any revision in revenue growth guidance, a possible share buyback announcement and a likely upward estimate in margins in the wake of a fall in the rupee.

Brokerages are not expecting any upbeat show from Infosys, in view of the company’s focus on growth against profitability. But its outlook for BFSI and retail segments and performance of its digital vertical will be among the key things to watch.

After posting poor growth for June quarter, the BFSI vertical showed promise in second quarter and the management had indicated green shoots. The company's aggression in enhancing digital capabilities is also expected to hit operating margin.

“Infosys is expected to report flat operating margin on a sequential basis owing to aggressive investments to enhance its digital capabilities and sharpen its focus on growth against profitability,” Sharekhan by BNP Paribas said in a report.

The brokerage expects operating profit margin (OPM) of the company to slip 110 bps YoY, while net profit is likely to grow 10.3 per cent YoY. Sequentially, OPM may be almost flat and net profit may decline 0.8 per cent, the brokerage said. It expects 1.3 per cent QoQ revenue growth in constant currency (CC) terms, with a cross-currency headwind of 60 bps.

Nirmal Bang Equities has factored in a 1.5 per cent QoQ CC growth and nearly 70 bps cross-currency headwind, resulting in 0.8 per cent revenue growth in dollar terms.

The brokerage expects revenue growth guidance to be maintained in 6-8 per cent range in CC terms and margins in the 22-24 per cent band.

Centrum Broking sees CC revenue growth for the company to be slightly higher. “We expect Infosys to report a 2 per cent QoQ CC revenue growth for 3QFY19,” Centrum said, adding that cross-currency headwind would be about 70 bps for the quarter.

Centrum projects dollar revenue of the IT bellwether to rise 1.3 per cent QoQ and 7.4 per cent YoY and expects Ebidta margin to be 40 bps lower at 25.6 per cent.

Healthy numbers for a company like Infosys are extremely important to set the tone for the sector and even for the broader market.

"We expect Infosys to upgrade lower end of revenue guidance band and expect it to guide for 7-8 per cent CC revenue growth against the 6-8 per cent earlier. The company has announced a slew of deals over the past few months and hence we expect continued confidence in revenue momentum," Centrum Broking said.

Infosys on Tuesday said it will consider issuing buyback and paying out special dividend in its board meeting on January 11.


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