Infosys rises 5%; Q2 earnings and share repurchases of Rs 9,300 crore boost sentiment

by flasharticle

The IT giant Infosys modified the revenue guidance from 14 to 16 percent to 15 to 16 percent in constant currency terms while maintaining the top end at the same level.

In Friday’s intraday session, Infosys shares rose 5% to Rs 1,487.70 on the BSE after the IT giant reported a better-than-expected consolidated net profit increase of 11% year-over-year (YoY) at Rs 6,021 crore for the September quarter and announced a buyback of shares worth Rs 9,300 crore.

Revenues for Infosys’ Q2-FY23 results were in line with expectations, but margins (up 140bps QoQ to 21.5%) were surprised pleasantly due to lower subcontracting expenses and helped the company outperform projections. The buyback size is in line with what we anticipated, but the maximum price is slightly higher than expected. In a post-result note, Jefferies’ Akshat Agarwal and Ankur Pant were quoted. They keep the stock with a “buy” rating and a target price of Rs. 1,700 per share.

India’s second-largest IT services provider has modified its revenue outlook for FY23 from 14 to 16 percent to 15 to 16 percent in constant currency, upping the lower end while maintaining the top end (CC). For FY23E, the upper end of the EBIT margin guidance was increased from 21–23% to 21–22% while maintaining the bottom end intact. Despite global macroeconomic concerns, the upward increase in revenue guidance is supported by a “strong large deals pipeline” and excellent demand momentum.

The Infosys board has also declared an interim dividend of Rs 16.50 per share. The business stated that the estimated payout for the interim dividend would be Rs 6,940 crore. The corporation has set October 28 as the provisional dividend record date and November 10 as the temporary dividend payout date.

Revenue growth for the company was 4% quarter over quarter (QoQ) and 18.8% year over year (YoY) in CC terms. Revenues in dollars climbed 2.5% QoQ to $ 4,555 million, while those in rupees increased 6% QoQ to Rs 36,538 crore.

“Infosys increased its revenue projection for FY23 due to its large deal TCV number, which was positive. According to our calculations, the company reported 5% CC growth in each of the upcoming two quarters (assumed 100 bps cross currency headwinds, 4% QoQ USD revenue growth), which suggests that seasonality may not be as severe as in the past, according to a note from ICICI Securities.

“It might also imply that the impetus for significant deal TCV will continue to be strong. Margin confidence was not the same as the increased goal for hiring first-year students. In our opinion, the favorable trend of LTM attrition moderating is consistent with their earlier commentary. Subcontractor costs are also declining; they currently account for 10.1% of sales, down from 11.3% in the previous quarter. However, according to the brokerage business, net additions must improve in the next quarters to ensure substantial growth.

In 2QFY23, Infosys reported solid earnings. Both the order book and demand are still strong. According to an update from Motilal Oswal Financial Services, the company’s robust FY23 growth projection and significant workforce expansion provide additional demand visibility. The trading company anticipates Infosys will produce a margin at the lower half of its target range, with solid growth and decreased reliance on subcontractors as attrition rates decline.

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