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NEW DELHI: Infosys' 6 per cent fall in Thursday's trade mirrored an overnight fall in Infosys' American depository receipts (ADRs), as analysts said deal wins moderated in March quarter, and like TCS, the numbers lacked positive surprises.
"The sequential growth was uninspiring and the FY22 guidance too was deemed conservative. Beating expectations every time isn't easy," said analysts, who believe the Rs 9,200 crore share buyback announced by the IT major should protect the downside for the stock.
The stock fell 5.59 per cent to hit a low of Rs 1,320.35 on BSE on Thursday. In overnight trade, Infosys ADRs fell 5.98 per cent to close at $17.31.
Credit Suisse called the March quarter earnings unimpressive and said FY22 guidance was conservative. While maintaining an 'outperform' rating on the stock, the brokerage said muted growth for the BFSI vertical led to weak sequential sales.
CLSA said the 2 per cent sequential constant currency (CC) revenue growth may be 'optically' disappointed. Acknowledging that beating expectations consistently is tough, the brokerage said beating rising expectations is even tougher. It said Infosys is its preferred IT play and suggesting a price target of Rs 1,660. Credit Suisse sees the stock at Rs 1,725.
Peer TCS reported a 4.2 per cent rise in sequential revenues on constant currency terms. Ebitda margin rose 20 basis points sequentially to 26.8 per cent compared with a 90 basis points fall for Infosys at 24.5 per cent. TCS' deal wins for the quarter stood at $9.2 billion, its highest ever. In contrast, Infosys deal wins stood at $2.1 billion. That said, March quarter is generally a seasonally weak period for Infosys.
On the guidance front, Infosys projected 12-14 per cent CC growth in FY22 against double-digit revenue growth for TCS. Infosys sees FY22 Ebit guidance at 22-24 per cent against TCS' aspirational band of 26-28 per cent.
Valuation wise, Infosys stock trades at 26 times FY22 expected earnings per share (EPS) against TCS' 29 times. UBS said since Infosys' Q4 earnings were below expectations and, like TCS, there was a lack of positive surprise, the earnings cycle seemed to have peaked for now. It sees a likely cut in consensus earnings, which may trigger a negative reaction.
"Buyback should offer downside support for Infosys," it said.
Phillip Capital said Infosys looks set to report mid-teen growth in FY22, after a strong performance in covid impacted FY21. "While the stock might remain a bit weak in the near term due to expectations coming down and relatively expensive valuations. We remain positive for the medium to long term on the strong growth story, driven by a robust demand environment," it said.
This brokerage said the overhang of the second Covid Wave and possible lockdowns in India would keep the IT sector in flavour in the near term, despite valuations bordering on expensive.
"The sequential growth was uninspiring and the FY22 guidance too was deemed conservative. Beating expectations every time isn't easy," said analysts, who believe the Rs 9,200 crore share buyback announced by the IT major should protect the downside for the stock.
The stock fell 5.59 per cent to hit a low of Rs 1,320.35 on BSE on Thursday. In overnight trade, Infosys ADRs fell 5.98 per cent to close at $17.31.
Credit Suisse called the March quarter earnings unimpressive and said FY22 guidance was conservative. While maintaining an 'outperform' rating on the stock, the brokerage said muted growth for the BFSI vertical led to weak sequential sales.
CLSA said the 2 per cent sequential constant currency (CC) revenue growth may be 'optically' disappointed. Acknowledging that beating expectations consistently is tough, the brokerage said beating rising expectations is even tougher. It said Infosys is its preferred IT play and suggesting a price target of Rs 1,660. Credit Suisse sees the stock at Rs 1,725.
Peer TCS reported a 4.2 per cent rise in sequential revenues on constant currency terms. Ebitda margin rose 20 basis points sequentially to 26.8 per cent compared with a 90 basis points fall for Infosys at 24.5 per cent. TCS' deal wins for the quarter stood at $9.2 billion, its highest ever. In contrast, Infosys deal wins stood at $2.1 billion. That said, March quarter is generally a seasonally weak period for Infosys.
On the guidance front, Infosys projected 12-14 per cent CC growth in FY22 against double-digit revenue growth for TCS. Infosys sees FY22 Ebit guidance at 22-24 per cent against TCS' aspirational band of 26-28 per cent.
Valuation wise, Infosys stock trades at 26 times FY22 expected earnings per share (EPS) against TCS' 29 times. UBS said since Infosys' Q4 earnings were below expectations and, like TCS, there was a lack of positive surprise, the earnings cycle seemed to have peaked for now. It sees a likely cut in consensus earnings, which may trigger a negative reaction.
"Buyback should offer downside support for Infosys," it said.
Phillip Capital said Infosys looks set to report mid-teen growth in FY22, after a strong performance in covid impacted FY21. "While the stock might remain a bit weak in the near term due to expectations coming down and relatively expensive valuations. We remain positive for the medium to long term on the strong growth story, driven by a robust demand environment," it said.
This brokerage said the overhang of the second Covid Wave and possible lockdowns in India would keep the IT sector in flavour in the near term, despite valuations bordering on expensive.
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1 Comment on this Story
 | ivcu199017 minutes ago Usually companies makes buy back of its share either to increase promoters holding or when company floating stock is very small so as to accommodate the shareholders to get fair value of shares. But in case of Infosys promoters holding is very small and this buyback will not increase the promoters holding significantly. As there is sufficient free floating shares of the company the price will be driven by company performance buyback will be not so effective on company share price. The company instead of making buyback of shares if they do capital reduction by converting the present Rs.5/- Face Value of shares into Rs.10/- each and after this returning Rs.9/- per share to shareholders making New Face Value of share as Re.1/- then automatically Number of shares will going to reduced to around 212.2 crores equity shares from present 424.4 crores equity shares. Small Equity is always good because as there is no restrictions on payment of dividend by company as it can declare any amount of dividend depending upon profits for the year. In future it can acquire any company by issuing shares instead of doing cash outflow and it can reward its shareholders by issuing bonus shares. Small equity capital is always positive for shareholders wealth creation. Please note that we are not experts and it only our personal views and thinking differs of from person to person and from time to time. |