Infosys - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 1388, MCap - Rs. 5,91,103 crore)

Infosys reported healthy set of Q3FY21 numbers. While revenues were above our estimate margins were in line with our estimates. The company's dollar revenues increased 5.3% QoQ vs our estimate of 3.3% in constant currency terms. The company's dollar revenues increased by 6.2% QoQ vs our estimate of 3.8% QoQ. The company also reported healthy EBIT margin of 25.4% (vs our estimate of 25.4%). In terms of geographies, growth was led by Americas, Europe and ROW which grew 7.7% QoQ, 4.8% QoQ and 4.4% QoQ, respectively. In terms of verticals the growth was led by BFSI, Manufacturing, Energy & Utilities and Lifescience which grew 9.8% QoQ, 8.5% QoQ, 7.9% QoQ and 10.8% QoQ.

The company's digital revenues increased by 12.3% QoQ and 33.6% YoY and now accounts for 50.1% of overall revenues. In terms of large deal pipeline, it increased from US$3145 million to US$7,129 million which we believe is mainly due to addition of Daimler deal. Further, the company has again outperformed TCS in terms of revenue growth in YoY terms in which TCS dollar revenues was up 5.1% YoY vs Infosys which increased by 8.4% YoY. In addition, Infosys has also registered EBIT margin of 25.4 vs TCS margin of 26.6% in Q3FY21. In terms of guidance the company has revised its FY21E revenues guidance upwards from 2-3% to 4.5-5% and operating margin guidance to 21-23% from 24-24.5%.

Q3FY21 Earnings Summary

Constant currency (cc) revenues increased by 5.3% QoQ (vs. our estimate of 3.3% QoQ growth). US$ revenues increased 6.2% QoQ to $3,516 million (above our estimate of 3.8% QoQ increase to US$3,438)

Rupee revenues grew 5.5% QoQ to Rs. 25,927 crore (vs. our estimate of 3.3% QoQ growth)

Reported EBIT margins were flat sequentially to 25.4% (vs our estimate of 25.4%)

Reported PAT stood at Rs. 5,197 crore (vs our estimate Rs. 5,126 crore)

Infosys has reported another healthy quarter and has registered healthy deal wins. In addition, the company has consistently outperformed TCS in revenue terms over the past few quarters and is also narrowing the gap between its margins. This prompts us to have a positive view on the stock.

We would be revisiting our estimates and target price shortly.

Shares of INFOSYS LTD. was last trading in BSE at Rs.1387.7 as compared to the previous close of Rs. 1371.85. The total number of shares traded during the day was 993426 in over 29537 trades.

The stock hit an intraday high of Rs. 1392.7 and intraday low of 1360. The net turnover during the day was Rs. 1370462896.

Source : Equity Bulls

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