Infosys’ September quarter numbers beat the consensus expectations but some negatives such as narrowing revenue growth guidance and weak outlook may keep the stock under pressure when it opens for trade.
The stock saw sharp selling in New York-listed Infosys ADR shares that have fallen about 7 percent as of 7.30 pm (India time) to $16.25.
“The company trimming its revenue guidance would be negative for the stock,” said Prashanth Tapse, Senior VP (Research), Mehta Equities. “Overall results are not so bad but discounted in prices. Revised guidance would put pressure on prices to sustain while it has maintained margins. Technically the last-minute fall in prices shows that results were not in favour of bulls, hence a gap-down opening between Rs 1,400-1,420 could be seen in the opening trade.”
Ahead of the earnings announcement, Infosys closed at Rs 1464.55 on BSE, down about 2 percent.
Infosys narrowed its revenue growth guidance for the full year at the upper end and has now guided for revenue growth of 1-2.5 percent for the full year. This comes after it sharply slashed the guidance last quarter to 1-3.5 percent from 4-7 percent.
Sumit Pokharna, Research Analyst, Vice President at Kotak Securities, said that Infosys’ Q2 headline numbers were impressive on the back of 2.3 percent constant currency revenue growth on a sequential basis, and EBIT margin increase of 40 bps QoQ despite higher subcontracting costs and partial wage revision.
Also read: Infosys headcount shrinks by 7,530 in Q2, third consecutive quarter of decline
“The company has posted good net profit numbers and a record large deal value of $7.7 billion. However, guidance cut once again at the upper end of the band implies flat to 1.9 percent decline in revenues in the next two quarters,” said Pokharna.
The EBIT margin or the operating margin was up 40 bps to 21.2 percent, thanks to a weaker rupee and the company not rolling out wage hikes so far. The company retained its operating margin guidance of 20-22 percent.
In the ongoing quarter, the company said it will take wage hikes from November 1, which will likely put pressure on profitability.
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