While Infosys did manage to spring a positive surprise with its third quarter numbers, despite Q3 being a seasonally weak quarter for the sector, analysts still believe that the company is couple of quarters away from witnessing a turnaround.
As per a CNBC-TV18 poll, for the quarter ending March 31st, 2013, Infosys is expected to report a flat sequential revenue growth with revenue in dollar terms expected to come in at USD 2102 million. In rupee terms, the company may witness a marginal fall of 0.5 percent with revenues expected at Rs 12,962 crore versus the Rs 13,026 crore figures reported last quarter. Profits may see a 1.4 percent dip with net profit expected at Rs 2835 crore versus Rs 2875 crore reported last quarter at the back of a cautious management commentary.
Infosys had earlier indicated that business has been sluggish for the past two months and IT budgets have been impacted by (1) Aggressive promotions and discounting by retailers that have impacted earnings, (2) Reduced growth expectations in emerging markets and (3) The harsh winter in the US.
EBIT margins are expected to rise marginally from 25.02 percent last quarter to 25.13 percent in the Jan to March quarter aided by cost optimisation initiatives by the company that is expected to flow into a steady margin performance. Last quarter Infosys had delivered a growth of 140 basis points in its margin performance driven by higher utilisation, higher offshore percentage and cost cutting initiatives.
In full year terms, dollar term revenue growth may rise by 11.6 percent at USD 8259 million vs USD 7398 million in the same period last year, whereas in rupee terms the company may see a growth of 24.5 percent at Rs 50,220 crore vs Rs 40,352 crore in the same period last year. For FY14 management had cautioned that growth will be at the lower end of the guidance of 11.5-12 percent projected by the management, in dollar terms. Profits may rise 11.34 percent coming in at Rs 10,491 crore vs Rs 9421 crore reported last year in the same period.
The street however is most watchful for the guidance that Infosys will project for FY15. While analysts have a wide range of expectations, most expect the company to project a guidance of 6-8 percent for FY15 at the back of a weak FY14 exit and muted growth expectations in 1HFY15. Revenue guidance below 6 percent will be a negative surprise for the street and can subsequently hit the stock.
Nasscom guidance for the sector's growth in FY15, given in February 2014, stood at 13-15 percent. All in all the street has a cautious approach in expectations from Infosys, largely owning to the managements clear indication that it would take up to three years for the company to bounce back to a sector leading revenue growth performance and hence a FY15 revenue guidance expectation below Nasscom's guidance range is not a big surprise.
Infosys stock price
On April 11, 2014, Infosys closed at Rs 3235.85, up Rs 29.25, or 0.91 percent. The 52-week high of the share was Rs 3847.20 and the 52-week low was Rs 2190.00.
The company's trailing 12-month (TTM) EPS was at Rs 167.46 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 19.32. The latest book value of the company is Rs 627.95 per share. At current value, the price-to-book value of the company is 5.15.
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