ECONOMY

Analysts Stay Bullish On Infosys But Cut Earnings Estimate Post Q4 Results

Most analysts maintained their bullish investment recommendation for Infosys Ltd. but cut earnings estimate for the ongoing and the next financial year after disappointing fourth-quarter results.

The IT company saw its revenue rise 1.5% over the preceding quarter to Rs 26,311 crore in the three months ended March, according to an exchange filing. Its revenue in U.S. dollar terms rose 2.8%. Net profit and EBIT, however, fell more than 2% each sequentially, while margins contracted 90 basis points to 24.5%.

The company expects its FY22 revenue to grow between 12% and 14% in constant currency terms; while operating margins were guided to be in the range of 22-24%, lower than the 24.5% upper end of FY21.

While some analysts termed Infosys’ revenue guidance for the ongoing fiscal as “conservative” given large deal wins, and a spike in attrition a negative; others expect upward revisions to its FY22 guidance and ramping up of large deal wins.

The technology services provider also announced an open market share buyback through which it will purchase shares at a price of up to Rs 1,750 apiece. Motilal Oswal and CLSA expect this buyback to led downside support to stock price.

Infosys’ American Depository Receipts fell 6% in the early hours of trade on the back of the earnings disappointment.

Shares of Infosys fell as much as 5.5% to Rs 1,320 and are down for the third straight day. The stock is trading at the lowest level in over a month. Of the 47 analysts tracking Infosys, 43 have a ‘buy’ rating, three suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. Based on the 12-month Bloomberg consensus data, the stock has a return potential of 13.3%.

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