Infosys to announce Q4 earnings on April 13; Watch out for these 5 factors

Profit

The profit for the quarter is expected to decline compared to previous quarter as its March 2017 profit was boosted by reversal of income tax provision of Rs 1,432 crore.

A CNBC-TV18 poll expects Infosys to report profit at Rs 3,679 crore for March quarter, the fall of 28 percent compared to Rs 5,129 crore in December quarter while the adjusted profit is seen falling around half a percent while the Reuters poll expects it to increase 0.9 percent QoQ.

Revenue

It is a seasonally weak quarter for the company but analysts expect the quarter to be good compared to the previous year.

A CNBC-TV18 poll expects the dollar revenue growth of 2 percent and constant currency growth of 1 percent QoQ, against 0.7 percent and 0 percent in Q4FY17, respectively.

"Revenues are expected to grow 1.4 percent QoQ in constant currency terms, aided 100bps by currency movement (USD growth 2.4 percent QoQ)," Edelweiss Securities said while Kotak Securities expects constant currency revenue growth of 0.5 percent and cross currency tailwind of 100 basis points.

Emkay Research expects constant currency growth of 1.1 percent QoQ (with around 87 basis points cross currency tailwinds) largely on volume growth and stable pricing.

A CNBC-TV18 poll expects rupee revenue growth of 1.9 percent at Rs 18,140 crore while the Reuters poll estimated 1.8 percent growth at Rs 18,114 crore.

Operational Performance

Operating profit is expected to increase 2.2 percent sequentially to Rs 4,416 crore in Q4FY18 with flat margin, according to average of estimates of analysts polled by CNBC-TV18 while the Reuters poll estimated growth of 2.4 percent with 10 basis points margin expansion.

"EBITDA margin expected to rise 30bps QoQ due to absense of wage hikes and operational efficiencies negating impact of ramping of US worforce," Edelweiss Securities said.

Guidance

Analysts expect Infosys to meet its full year (FY18) constant currency growth guidance of 5.5-6.5 and dollar revenue growth of 6.5-7.5 percent with margin at around 24 percent (guidance of 23-25 percent).

The financial year 2018-19 guidance will be closely watched as it will be the first guidance from the new CEO Salil Parekh.

A CNBC-TV18 poll expects FY19 constant currency revenue growth at 6-8 percent against Nasscom at 7-9 percent Cognizant 8-10 percent and Accenture 7-9 percent.

CLSA and Emkay expect Infosys guidance at 5–7 percent, Nomura & Citi at 5.5–7.5 percent, Credit Suisse & Kotak Securities at 6-8 percent, BNP Paribas & Ambit at 7-9 percent and Edelweiss at 6.5-8.5 percent.

Dollar revenue growth is estimated at 7-9 percent, a CNBC-TV18 poll said while majority of brokerage houses expect the company to maintain margin guidance at 23-25 percent for FY19.

Commentary

The street will closely watch the commentary of new CEO Salil Parekh on new strategy, deal momentum, capital allocation policy, progress on onsite hiring and sectoral growth.

"With Salil Parekh completing his first quarter in Infosys, his strategy and vision to drive the company forward will be keenly watched. Also, with TCS announcing massive deal wins, all eyes will be on deal wins and large deal renewals during the quarter, Guidance for FY19, Parekh's commentary on digital and client spendings will be key monitorables," Edelweiss Securities said.

Kotak Securities expects investor focus on strategy of the new CEO, especially on the following fronts (1) focus on development/promotion of proprietary software versus adoption of 3rd party products/platforms, (2) M&A strategy and (3) focus and strategy for revival of consulting practice.

Emkay expects investors to focus on (1) Strategy update from the new CEO (2) Revenue guidance and (3) feedback from client budget plans.