Infosys Q1 net seen down 1% to Rs 2,369.8 cr: Motilal Oswal

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for technology sector. The brokerage house expects Infosys to report a 1 percent degrowth quarter-on-quarter (growth of 3.5 percent year-on-year) in net profit at Rs 2,369.8 crore.

Revenues are expected to increase by 5 percent Q-o-Q (14.2 percent Y-o-Y) to Rs 10,981.9 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 4.6 percent Q-o-Q (down 1.7 percent Y-o-Y) to Rs

2,895.9 crore.

Motilal Oswal report on Infosys

Infosys had guided for 6-10 percent YoY growth in FY14 revenue to USD 7,842-8,138 million, implying CQGR of 1.2 percent to meet the midpoint of the same.

We expect overall revenue in 1QFY14 to be at USD 1,961 million, growth of 1.2 percent Q-o-Q. This includes negative impact from cross

currency of 50bp, implying CC revenue growth estimate of 1.7 percent Q-o-Q. In rupee terms, we expect revenue growth of 5 percent Q-o-Q to INR109.8 billion.

Company suspended the practice of giving EPS guidance or outlook on margins citing uncertainty in various factors.

We expect margins to remain flat, cushioned by the fall in currency, compensating for the wage hikes provided in the quarter. We model
15bp Q-o-Q decline in EBITDA margin to 26.4 percent. We expect SGA spend to increase to 12 percent v/s 11.4 percent.

We expect PAT to decline 1 percent Q-o-Q to INR23.7 billion on account of higher taxation (26.5 percent v/s 23.7 percent in 4Q), lower operating margin and lower other income Q-o-Q.

Infosys trades at 14.9x FY14E and 13.7x FY15E earnings. Maintain Buy.

Key issues to watch out

Revenue growth guidance.

Commentary on impact from Immigration Bill.

Clarity on margin roadmap.