Country's second largest IT services company Infosys is expected to report around 4 percent growth in dollar revenue for the quarter-ended September 30, while constant currency topline growth could be more than 2.5 percent.
Ramp-up of large deals and recovery in BFSI could drive revenue growth during the quarter. Overall, brokerages expect Vanguard acquisition to boost deal wins.
The stock, since June quarter earnings announcement, has rallied 49 percent. It was trading at record high levels ahead of quarterly earnings on October 14.
"We expect revenue growth of 2.7 percent QoQ on constant currency basis and cross-currency tailwind of 140 bps on dollar revenue growth. In USD terms, revenue is expected to grow by 4.1 percent QoQ," Sharekhan said.
"Growth would be led by ramp-up of large deals and recovery in BFSI and continued growth in hi-tech, lifescience, and healthcare verticals. Deal signings are expected to remain record high because of Vanguard deal during the quarter," the brokerage added.
Courtesy Vanguard deal, Kotak Institutional Equities too expects all-time high total contract value (TCV) of large deals. The previous high was $2.85 billion announced in September 2019.
EBIT margin is likely to remain stable on sequential basis with cost measures, which along with revenue growth could push profit higher by 4-6 percent QoQ in September quarter.
"We forecast stable margins on sequential basis and increase on YoY comparison. Impact of pricing will be offset to an extent by operational improvement. Earnings growth is lower than EBIT growth on YoY comparison due to decline in other income resulting from lower treasury yields," Kotak said.
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Given the better demand environment and strong deal momentum, brokerages expect Infosys to raise full-year constant currency revenue guidance from 0-2 percent mentioned earlier.
Kotak and Sharekhan, both feels the revised guidance could be 1-3 percent growth for FY21, but margin may remain at 21-23 percent.
Key things to watch out for would be full year guidance, demand trends across verticals, update on deal wins, M&A strategy, pricing pressure and cost take outs, commentary on normalisation of decision-making cycle and deal pipeline, and opportunity in terms of higher outsourcing activities by clients and progress on vendor consolidation decisions.