Infosys - 3QFY23 Result First Cut - Reliance Securities

Mr. Mitul Shah - Head of Research at Reliance Securities.

Infosys reported a healthy performance in 3QFY23 with revenues 0.7% above our estimates in seasonally weak quarter. However, EBIT margin came in at 21.5%, 30bps below our estimate of 21.8% while its PAT is above our estimate by 2.5%, supported by lower tax rate and healthy other income.

# Revenue grew by 2% QoQ/10% YoY in USD to US$4,659mn, 0.7% above our estimate of US$4,625mn. Sequential constant currency growth came in at 2.4% vs. our estimate of 1.3%. The growth was primarily from Energy, utility, manufacturing and Hi-tech segments and in terms of geographies, North America and Europe delivered strong growth.

# EBIT grew by 5% QoQ (up 10% YoY) to Rs82.4bn while EBIT margin stood at 21.5% (flat QoQ /down 198bps YoY), 30bps below our estimate of 21.8%, due to higher Other expenses (up 28bps YoY/21bps QoQ as a % of sales).

# Its net income stood at Rs65.9bn (up 9% QoQ/ up 13% YoY), while net margin came in at 17.2% vs. our estimate of 16.9% due to higher non-operating income.

# LTM attrition stood at 24.3% compared to 27.1% in 2QFY23.

# New deal wins are at record high US$3.3bn as against US$2.7bn recorded in 2QFY23, which is commendable.

Our View: Infosys reported a healthy 3QFY23 performance. Margins were slightly below our expectations. Moreover, management raised its FY23 revenue growth guidance range from 15-16% to now 16-16.5%, and maintained its EBIT margin guidance to 21-22%, indicating better performance during the balance of FY23. Considering the industry-leading double-digit revenue growth, rising share of digital business (~63% of revenue), likely improvement in EBIT margin levels from current levels, declining attrition rate and record high new TCV, we maintain our BUY recommendation on the stock.

Shares of Infosys Limited was last trading in BSE at Rs. 1480.55 as compared to the previous close of Rs. 1471.45. The total number of shares traded during the day was 227373 in over 14892 trades.

The stock hit an intraday high of Rs. 1485.00 and intraday low of 1455.25. The net turnover during the day was Rs. 334503855.00.

Source : Equity Bulls

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