Infosys - Q1FY21 First Cut - ICICI Securities

(CMP - Rs. 831, MCap - Rs. 3,54,127 crore)

Infosys reported a healthy set of Q1FY21 numbers both on revenue and margin front. Further, the company's Q1FY21 performance was better than TCS Q1FY21 numbers. The company reported 2.4% QoQ dip in dollar revenues (above our estimate of decline of 5.5% QoQ) vs. TCS, which reported 7.1% QoQ dip in dollar revenues. In terms of margins the company's EBIT margins improved by 149 bps to 22.7% (above our estimate of 20.9) vs. TCS, which reported 149 bps dip in margins. The company's large deal signings have increased by 5.5% QoQ to US$ 1.74 billion. The company's digital revenues have increased by 3.6% QoQ and 24.1% YoY to US$1389 million and now contributes 44.5% of total revenues. In terms of guidance, the company expects 0-2% growth in revenues in constant currency terms and operating margins in the range of 21-23%.

In terms of verticals, revenues decreased in retail, Manufacturing, Communication and financial services down 9.9% QoQ, 8.2% QoQ, 3.1% QoQ and 1.8% QoQ. This was partially offset by 7.5% QoQ growth in Hi Tech, 0.6% QoQ growth in Energy & Utility vertical and 2.2% QoQ growth in lifescience. In terms of geographies, the revenues declined across geographies except India which increased by 8.9% QoQ. In terms of margins, the 149 bps increase was led by rupee depreciation (70 bps), lower travel & visa cost (213 bps), lower discretionary spend (110 bps), partially offset by lower utilisation (150 bps), higher onsite cost (30 bps) and higher variable pay (100 bps). The company has also seen improved attrition from 20.5% to 11.7%.

Q1FY21 Earnings Summary

- Constant currency (CC) revenues declined 2.0% QoQ (vs. our estimate of 5.2% QoQ decline). US$ revenues declined by 2.4% QoQ to $3,121 million (vs our 5.5% QoQ decline and $3,021 million estimate)

- Rupee revenues grew 1.7% QoQ to Rs. 23,665 crore (vs. our estimate of 1.6% QoQ decline)

- Reported EBIT margins expanded 149 bps sequentially to 22.7% (above our estimate of 20.7%). Higher than expected margins was on account of beat on revenues and better than expected gross margins

- Reported PAT came in above our estimate at Rs. 4233 crore (our estimate Rs. 4066 crore) due to better performance at operating level

- Healthy deal wins, digital growth story, improvement in margins and healthy FY21E outlook augurs well for the company. Hence, we remain positive for the company

We would be revisiting our estimates and target price shortly.

Shares of INFOSYS LTD. was last trading in BSE at Rs.831.45 as compared to the previous close of Rs. 783.2. The total number of shares traded during the day was 1272970 in over 30111 trades.

The stock hit an intraday high of Rs. 848 and intraday low of 795.35. The net turnover during the day was Rs. 1056949561.

Source : Equity Bulls

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