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Infosys Q4 profit may fall 3.7%, FY18 dollar revenue growth guidance seen at 7-9%

Even as analysts expect Q4 profit to decline 3.7 percent, will the software major meet its FY17 dollar revenue guidance?

April 13, 2017 / 08:41 AM IST

Infosys, the country's second largest software services exporter which will announce its results on Thursday, is expected to show subdued bottomline growth for January-March quarter but the key factor to watch out for would be its guidance for FY18 and whether the company will meet its FY17 dollar revenue guidance or not.

Profit during the quarter is likely to decline 3.7 percent to Rs 3,570 crore and revenue may fall 0.2 percent to Rs 17,235 crore compared with previous quarter, according to average of estimates of analysts polled by CNBC-TV18.

However, dollar revenue may see some pick up against 1.4 percent degrowth in previous quarter due to RBS deal cancellation and weakness in top clients. It may increase 1.3 percent sequentially to USD 2,584 million as analysts expect some forex tailwind of around 30 basis points from cross currencies.

Implied Q4 dollar revenue guidance range is -0.2-1.3 percent and 0.3-1.8 percent in constant currency. Analysts say revenue recognition from GST is the wild card for further growth.

The Street will closely watch its FY17 revenue as Infosys estimated its revenue growth for the year at 7.2-7.6 percent (that was lowered from 7.5-8.5 percent) in dollar terms and 8.4-8.8 percent in constant currency. Rupee revenue is expected to be at 10-10.4 percent (that also lowered from 10.9-11.9 percent earlier).

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According to a CNBC-TV18 poll, profit during FY17 is seen rising 6.1 percent to Rs 14,320 crore while rupee revenue may increase 9.9 percent to Rs 68,600 crore compared with previous financial year.

Dollar revenue is expected to grow 7.6 percent to USD 10,223 million compared with USD 9,501 million in previous year. EBIT may jump 8.6 percent to Rs 16,960 crore but margin may shrink 32 bps to 24.7 percent.

Other key point to look at would be its current financial year guidance. Analysts expect company to guide its FY18 constant currency revenue growth at 7-9 percent, implying compounded quarterly growth rate of 2.3-3 percent for four quarters of the year.

Infosys could take a conservative stance against aggressive stance at the beginning of the year as the company in FY17 had tweaked its guidance thrice and due to uncertainty around visa/tax regulations in the US & Brexit.

CLSA expects 8-10 percent growth and HSBC sees 6-8 percent growth in dollar revenue for the financial year 2017-18. If the company chooses to suspend guidance citing lack of enough visibility, it could hurt the stock & sector, analysts feel.

Earnings before interest and tax (EBIT) may fall 1.5 percent sequentially to Rs 4,270 crore and margin may contract 30 basis points to 24.8 percent in Q4FY17, hit by rupee appreciation but continued cut in travel cost in Q4 may support margin.

Other key factors to watch out would be visa issues, rupee appreciation, hopes of pick up in US BFSI and capital allocation.

In 2017, the stock fell 4.8 percent, underperforming its peers TCS (up 3.4 percent), HCL Technologies (up 1.5 percent) and Wipro (up 8 percent).
first published: Apr 13, 2017 08:30 am
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