What to expect from Infosys’ Q4FY16 results

Infosys has seen a steady rise outperformed the markets thus far in calendar year 2016 (CY16), with the stock rallying nearly 6.3% to Rs 1,175 levels by close of trade on Wednesday. By comparison, the Nifty has slipped 1.2% during this period.

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The information technology (IT) company is scheduled to announce financial results for the fourth quarter (Q4FY16) and year ended March 31, 2016 (FY16) on April 15, 2016. Here’s what analysts from top research and brokerage houses across the country expect:

NOMURA

We expect Infosys to guide FY17F USD constant currency revenue growth for 11-13%. Key factors to watch would be: 1) any signs of stability in pricing, 2) sustenance of the near $1 billion deal wins (announced in 2Q) and its translation into revenues, and 3) sustained momentum in larger segments. Lower–than–expected guidance and moderation in margins could be taken negatively.

Also Read: IT firms behave like immigration agents: N R Narayana Murthy

While street expectations of around 13% y-o-y USD revenue growth in FY17F and margin improvements look a tad aggressive to us, we still expect Infosys to outperform TCS on revenue growth in FY17/18F.

EDELWEISS

Though the second half (H2) for Indian IT large-caps like Infosys and TCS is generally weak, we anticipate modest quarter-on-quarter (q-o-q) revenue growth in Q4FY16 given absence of the Chennai flood loss and 1 additional day in February. We believe Infosys’ revenue guidance will beat even most optimistic estimates and be higher than Cognizant’s as well for FY17 at 12-14% in constant currency terms.

Also Read: Infy founders have little to complain about Sikka’s performance

Also, despite apprehension on Infosys’ margin due to caution raised earlier by management, we believe it will expand 120 basis points (bps) during the quarter as well and we expect commentary to imply improving margin.

IIFL

We believe that Infosys’s constant currency (cc) dollar revenue growth in FY16 could surpass the upper end of its guidance of 12.8?13%. This is expecting 2?2.5% constant currency q-o-q growth in Q4FY16, which is quite plausible given impressive outcome from the new strategy in terms of improving wallet share and deal signings. For FY17, we estimate the management to guide for similar to FY16 growth i.e. within the range of 12?14%.

Also Read: Infy to extend CEO Sikka’s tenure by 2 years till 2021

PRABHUDAS LILLADHER

Infosys is expected to report sector leading y-o-y growth in Q4FY16 and guide for above industry growth in FY17. Our channel checks indicate healthy deal pipeline and a significantly better win rate in large deals. Infosys is in the midst of an earnings upgrade cycle and that should drive premium valuations and stock performance.

We expect Infosys to report Q4FY16 constant currency revenue growth of 2.3% q-o-q, best ever Q4 in several years. Infosys’ Q4FY16 y-o-y constant currency revenue growth will be 15.4% against 7.8% in Q4FY15 indicating sharp improvement in growth trajectory. We expect Infosys to guide for FY17 CC revenue growth of 12?14%.

EXPECTATIONS FROM Q4FY16
Revenues EBITDA PAT
Edelweiss 16,633 4,724 3,696
Prabhudas Lilladher 16,576 4,458 3,445
IIFL 16,602 NA 3,555
Emkay 16,726 4,620 3,526
Axis Capital 16,387 4,076 3,488
Source: Research reports; All figures in Rs crore

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What to expect from Infosys’ Q4FY16 results

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