Infosys Ltd. - Q3 FY23 Earning Highlights | Globe Capital
13-Jan-2023
Infosys Ltd. – Q3 FY23 Earning Highlights

The Company beats market expectations & revised its constant currency (CC) revenue growth guidance for the current financial year to 16-16.5% from 15-16% earlier. However, Infosys retained its operating margin guidance for FY23 at 21-22%.  

Q3 FY23 Earning Overview and Verdict
CMP
Rs. 1471
Verdict
Beat the market estimates.

Q3FY23 Earning Key Highlights:

  • Infosys, a global leader in next generation digital services and consulting, reported strong Q3 performance with year-on-year growth at 13.7% and sequential growth at 2.4% in constant currency.
  • Reported revenues at Rs. 38,318 crore, growth of 20.2% YoY. Consolidated net profit for the quarter rose 13.4% on year to Rs 6,586 crore.
  • Digital revenues at 62.9% of total revenues, YoY CC growth of 21.7%
  • Operating margin at 21.5%, decline of 2.0% YoY and stable QoQ
  • Basic EPS at Rs. 15.72, growth of 13.4% YoY
  • FCF at Rs. 4,741 crore, decline of 12.2% YoY; FCF conversion at 72.0% of net profit.
  • The Company net added 1,627 employees in the December quarter when peer Tata Consultancy Services saw a drop in the net additions. As of December 31, the total headcount stood at 346,845.

Management Takeaways:

Despite the quarter being a seasonally weak one for the sector, the Company won deals worth $3.3 billion, the strongest in the last eight quarters.

Large deal TCV for the quarter was the strongest in the last 8 quarters at $3.3 billion. Digital comprised 62.9% of overall revenues and grew at 21.7% in constant currency. Operating margin for the quarter remained resilient at 21.5%.

Operating margins in Q3 remained resilient due to cost optimization benefits which offset the impact of seasonal weakness in operating parameters. Attrition reduced meaningfully during the quarter and is expected to decline further in the near-term

Future Guidance: FY23 revenue guidance revised to 16.0%-16.5%. FY23 operating margin guidance retained at 21%-22%.

Capital Allocation: Pursuant to the Board recommendation and subsequent to shareholders’ approval through postal ballot, the company has started share buyback program through open market route from December 7, 2022 and till date, has bought back 31.3 million shares worth ₹4,790 crore or 51.5% of total authorization of ₹9,300 crore at an average price of approx. ₹1,531 per share (compared to maximum Buyback Price of ₹1,850 per share).

Valuation & View

At the CMP of Rs. 1471, the stock is trading at annualised P/E multiple of 27 times with the annualised EPS of Rs. 53.56, which is fairly valued.

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