Infosys hits fresh 52-week high ahead of Q3 results

The stock moved higher by 2.7% to Rs 1,080 in intra-day trade, extending its 4% gain in past three days on BSE

Infosys moved higher by 2.7% to Rs 1,080 in intra-day trade, extending its 4% gain in past three days on BSE, ahead of October-December (Q3FY18) results on Friday, January 12, 2018. The stock of information technology (IT) company is trading at its highest level since October 14, 2016.

Motilal Oswal Securities expects Infosys’s Q3FY18 EBITDA (earnings before interest, taxes, depreciation and amortization) to contract by 40bps quarter on quarter (QoQ0 to 26.4%, led by continued investments in the business and the fact that operational efficiency levels have been squeezed materially over the last few quarters.

“We estimate Infosys to post 1.4% QoQ growth in USD terms, impacted 10bps by cross currency, implying 1.5% QoQ constant currency (cc) growth. With clients increasingly adopting Nia, Panaya, Skava & Edge, new technologies are expected to drive revenue during the quarter. We estimate the company’s operating margin to contract 50bps QoQ on account of wage hikes for mid-level and onsite employees and ramping up of US workforce,” Edelweiss Securities said in result preview.

With Salil Parekh taking over as CEO from January 2, his strategy and vision to drive the company out of challenges will be key monitorable, added report.

Infosys has guided for 5.5‐6.5% cc revenue growth for FY18. We expect the company to maintain the cc revenue growth guidance. We have estimated Infosys’ USD revenues to grow by 7.3% for FY18E (Constant currency growth at 6.2%) against Infosys delivering 8.3% revenue growth in constant currency for FY17. Hence, FY18 revenue growth would be lower than FY17 in constant currency, the brokerage firm Prabhudas Lilladher in earnings preview.

“Infosys has lost the growth momentum it gained in previous years from a combination of factors including execution, leadership and weaker market conditions. A CEO change under returning founder has driven a sharp expectation reset”, analyst at CLSA said in IT services sector outlook.

Infosys can stabilise its senior leadership, arrest margin slippage and strengthen client relationships. The brokerage firm expects growth recovery to be slow initially as strategy gaps are addressed, it added.

At 02:10 PM; the stock was up 2.3% at Rs 1,076 on BSE, as compared to 0.31% rise in the S&P BSE Sensex. A combined 5.97 million shares changed hands on the counter on BSE and NSE so far.