The stock price of the country's second-largest IT services major, Infosys, declined 10 percent on the New York Stock Exchange (NYSE) and 3 percent on the National Stock Exchange (NSE) after muted Q4 earnings reported on April 13.
The company reported a 7.8 percent on-year growth in consolidated net profit to Rs 6,128 crore, and revenue increased 16 percent to Rs 37,441 crore. On a sequential basis, it posted a decline of 2.3 percent in revenue and 7 percent in profit.
Operating profit for the quarter stood at Rs 7,877 crore with operating margin contracting 0.5 percent both yearly and sequentially. The company has given a lower guidance of 4-7 percent revenue growth in FY24 along with targeted operating margin of 20-22 percent.
Brokerages have weighed in on Infosys, and remain watchful on the company's prospects ahead with analysts largely cutting their target price and EPS (earnings per share) estimates.
Also Read: Infosys to roll out structure for financial services team as Mohit Joshi leaves
Financial advisory firm Ambit Capital has given Infosys a ‘sell’ rating and reduced its target price (TP) to Rs 1,340 from Rs 1,505, citing growth, margin, and guidance as being materially below its expectations. The declines were seen across all verticals in the US, it said, and moderated the company’s’ constant currency (cc) revenue growth to 5/7.3 percent in FY24/25 from 7.1/7.7 percent, and also cut the FY25 EPS estimates by 5 percent.
Foreign brokerage firm Nomura downgraded Infosys to 'neutral' from 'buy' and cut its TP to Rs 1,290 from Rs 1,660. Nomura said that guidance and deal wins indicate a weak outlook and also cut EPS FY24-25 estimates by 8-9 percent. On a similar note, DAM Capital has downgraded Infosys to ‘neutral’ with a target cut to Rs 1,390 from Rs 1,594, and reduced the EPS estimates for FY24/25 by 4.7 percent/6 percent. They expect the company to deliver a 7.9 percent revenue CAGR over FY23-25 with a 70 bps margin expansion.
ICICI Securities, on the other hand, maintained its ‘buy’ rating on the stock while lowering its TP to Rs 1,641. They see Infosys' FY24 revenue growth guidance at 4-7 percent, implying 1.5 percent to 3.2 percent CQGR, reflecting a strong pick-up in growth mostly in H2FY24. They are building in weak 1.4 percent QoQ constant currency revenue growth guidance for Q1FY24, followed by a sharp pick-up in the remaining 9MFY24.
“This makes us forecast a 6.4 percent CC revenue growth in FY24, closer to the higher end of the guidance. For FY25/26, we largely maintain our double digit revenue growth forecast of 13 percent/12.4 percent in CC terms as structural demand drivers for the industry around cloud migration/digitalisation and cost optimisation remain intact,” it added.
Also Read: Infosys leveraging generative AI capabilities for clients, within company, says CEO Salil Parekh
Brokerage firm Motilal Oswal also maintained its ‘buy’ rating on Infosys, but cut its TP to Rs 1520 while also lowering FY24/FY25 EPS estimates by 4/5 percent. They see FY24 profit growth in single digits at 9.3 percent YoY and expect FY24 EBIT margin to remain flat YoY at 21.1 percent.
Emkay cut its TP to Rs 1,620 from Rs 1,700 and EPS estimates by 4.4-6.3 percent for FY24/25 factoring in disappointing Q4 maintaining a ‘buy’ rating. It believes that Infosys is well-positioned to capture growth opportunities across digital transformation. The asking rate at the upper end of guidance appears to be demanding, they added.
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