Target: ₹1,675

CMP: ₹1,260.95

Infosys’ Q4 revenue missed BNPP expectation as unplanned client ramp-downs across sectors led to low volumes. Revenue also took a one-time hit from project cancellations and client-specific issues. EBIT margin also missed BNPP expectation on low utilisation and the revenue miss.

Infosys saw some stabilisation in March 2023 but said that the environment is still uncertain. Infosys’ FY24 guidance for CC (constant currency) revenue growth is 4-7 per cent and for margin is 20-22 per cent (both below BNPP expecatation) as it tries to balance wage hikes and higher travel expenses by improving utilisation and rationalising the employee pyramid.

We think the upper end of FY24 CC revenue growth guidance is achievable (BNPPe: 7.3%, implies 2.4 per cent $ CQGR in Q1-Q4-FY24). Deal wins fell 7 per cent y-o-y (₹2.1 billion, book-to-bill: 0.46x) in Q4-FY23 but Infosys continues to see a strong large-deal pipeline.

Given the heightened uncertainty at INFO, we think TCS is better positioned to benefit from the shift in customers’ focus to cost-optimisation deals and it is our sector top pick.

Infosys highlighted that there are many cost efficiency and consolidation deals in the pipeline. The company declared a final dividend of ₹17.5/share.

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