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Infosys misses profit estimates in Q1

IT-giant, Infosys registered a single-digit 3.2% growth in consolidated net profit to ₹5,360 crore for the quarter ending June 30, 2022 (Q1FY23) compared to a profit of ₹5,195 crore in the same period last year, missing analysts’ as rising costs took the shine off deal wins in the quarter. Q1 PAT declined by 5.7% from ₹5,686 crore in the preceding quarter. Consolidated revenue, meanwhile, increased by 23.6% in the quarter under review to ₹34,470 crore from ₹27,896 crore in Q1 a year ago, and was higher by 6.8% from ₹32,276 crore in Q4FY22.

Analysts had expected a profit of 56.26 billion rupees, Refinitiv data shows. The IT company raised full-year FY23 revenue guidance to 14-16% from 13-15% earlier.

Infosys delivered a robust performance in Q1 with year-on-year growth at 21.4% and sequential growth at 5.5% in constant currency. Year on year growth was in double digits across all business segments in constant currency terms. Digital accounted for 61.0% of overall revenues, growing at 37.5% in constant currency. Net hiring was strong at 21,171. Operating margin for the quarter was 20.1%, with Free Cash Flow conversion at 95.2% of net profit.

Meanwhile, the company posted a consolidated operating profit of ₹6,914 crore up by 4.7% from ₹6,603 crore in Q1FY22, but sequentially down by 0.6% from ₹6,956 crore in Q4FY22. Operating margin contracted to 20.1% in Q1FY23 versus 23.7% in Q1FY22 and 21.5% in Q4FY22.

Salil Parekh, CEO, and MD said, “Our strong overall performance in Q1 amidst an uncertain economic environment is a testament to our innate resilience as an organization, our industry-leading digital capabilities and continued client relevance. We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition.”

The company increased its FY23 revenue guidance to 14%-16% from the previous 13%-15% in constant currency. While the operating margin is expected to be at a growth rate of 21%-23%.

Parekh said, “We are investing in rapid talent expansion while ensuring rewarding careers for our employees, to better serve evolving market opportunities. This has resulted in a strong performance in Q1 and an increase in FY 23 revenue guidance to 14%-16%.”

Aditi Patil – a research associate at Prabhudas Lilladher said, Infosys missed on margins, however, was a beat on revenue with further up-gradation in the guidance. On the top-line front, She said, “Growth was led by Manufacturing 6.5%QoQ USD, Retail 5.3% QoQ USD, Energy & Utilities 7.3% QoQ USD and Communications 5.5% QoQ USD. Life Sciences grew 2.3%QoQ USD. In terms of markets, growth was led by America at 4.5% QoQ USD, and Europe grew by 3% QoQ USD. India declined by 15.6% QoQ USD and RoW grew 7.9% QoQ USD.”

Infosys’ free cash flow is at ₹5,106 crore as of June 30, 2022 quarter.

Infosys’ large deal TCV stood at $1.7 billion. As of June 30, 2022, Infosys 1 million dollar + clients were 877, while 278 clients were under 10 Million dollar +, 69 clients under 50 Million dollar +, and 38 clients under 100 Million dollar +. The company has active 1,778 clients as of June 30, 2022, while gross addition was 106 clients during the period.

For FY22, the company’s PAT jumped by 14.3% yoy to ₹22,110 crore, and revenue soared 21.1% yoy to ₹121,641 crore.

Last week, on Friday, Infosys shares stood at ₹1506.30 apiece down by ₹26.55 or 1.73%. Its market cap is around ₹6,33,793.91 crore. Infosys shares will be in focus this week’s trading following its earnings.

On stocks, Patil said, “Infy (CMP: Rs.1506) is currently trading at 26x/23x on FY23/24 EPS of ₹57/66 with Revenue/EPS CAGR of 12%/12% over FY22-24E.” Livemint

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