Infosys Q1 net profit seen down 3% QoQ at Rs 2,315cr
Analysts on average expect the company to report a Rupee revenue growth of 5.5 percent sequentially to 11,029 crore, while Dollar revenue is seen up 1 percent at 1.96 billion.
July 12, 2013 / 08:21 IST
Moneycontrol Bureau
Infosys will kickstart technology sector earnings with its first quarter results on Friday. This will be its first earnings announcement since the board reappointed the company's founder Narayana Murthy as its executive chairman.The Bangalore-based software services exporter is struggling to catch up with its rivals like Tata Consultancy Services, HCL Technologies and Cognizant Technology Solutions, following a string of disappointing results, prompting the board to reappoint Murthy to steer the company back to good times.However, the first quarter results are unlikely to bring much cheer to investors. Analysts on average expect Infosys' April-June quarter net profit to decline 3.3 percent quarter-on-quarter to Rs 2,315 crore, according to a CNBC-TV18 poll.Its Rupee revenue is expected to rise 5.5 percent to 11,029 crore, helped by the recent sharp depreciation in the Rupee. US Dollar revenues will likely increase 1 percent sequentially to USD 1.96 billion, according to analysts' estimates.Analysts also expect its EBIT (earnings before interest and taxes) in April-June at Rs 2,563 crore, while EBIT margin is seen at 23.23 percent, compared with 23.55 percent in Jan-March."We expect Q1 revenues to be flattish, with wage hikes and productivity hitting QoQ margins and offsetting rupee depreciation," say Vipin Khare and Gaurav Rateria of Morgan Stanley.The Rupee depreciated on an average 3 percent last quarter, while end-to-end it is down 9 percent, which will boost the Rupee revenue. However, the US Dollar has gained against the Euro, Pound Sterling and Australian Dollar, which will keep the gains in check."Infosys should report 0.7 percent QoQ growth in revenues to USD 1.95 billion. Margins should be down 14 bps with adverse impact of wage hike to sales staff and reset at senior employees and visa cost broadly balanced by currency depreciation," feels CLSA analyst Nimish Joshi.WILL INFOSYS CUT GUIDANCE? Infosys has guided for 6-10 percent growth in USD revenue this financial year, much lower than the 12-14 growth that industry body NASSCOM expects. Accenture last month cut its revenue growth guidance for the current year to 3-4 percent from 5-8 percent earlier. So investors will be keenly looking out for Infy's comments on guidance on Friday and any cut now will limit any EPS (earnings per share) upgrades for FY14, despite the Rupee fall, analysts say. The street though is divided whether the company will further cut its forecast this quarter.CLSA doesn't expect any major surprise and feels commentary will remain similar to 3 months back. However, Morgan Stanley says Infosys may cut its guidance to 4-6 percent. Ambit Capital analysts Ankur Rudra and Nitin Jain expect Infosys to lower its guidance to 5-9 percent to reflect the cross-currency impact of 100 bps.However, several analysts say that the guidance is already in a broad range, the US market is looking up and its too early in the year for the company to take any decision on it, so there is unlikely to be any surprise here.However, the company, once the IT bellwether, has lost credibility in guidance. Last year (FY13) it had initially guided for 8-10 percent, later revised it to 6.5 percent (5 percent organic growth and 1.5 percent from the Lodestone acquisition), but finally even missed the revised forecast. STOCK WATCHInfosys shares were up 1.8 percent at Rs 2,544.85 on NSE in afternoon trade on Thursday. The stock is down 14 percent since it announced its fourth quarter results on April 12. In comparison, the CNX-IT index is down 7 percent and the wider Nifty is up 4 percent.Infosys Q1: Will bears maintain their dominance on Friday?Ambit Capital has a "sell" rating on Infosys as it is "sceptical about a near-term turnaround."However, Infosys is one of Citigroup's preferred picks, apart from HCL Technologies and MindTree. It is also CLSA's preferred pick apart from HCL Technologies."Through FY14, we believe Infosys and HCL Tech have the highest propensity to surprise on revenue growth and margins respectively," CLSA said. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
