Analysis: No fireworks from Infosys this quarter either

Infosys expects the rupee to settle around Rs 51-52 range from here till the end of the fourth quarter. With this the excitement of upgrades for the sector, thanks to the expectations of an increase in earnings in rupee terms, will ebb. It’s back to business fundamentals for Infosys and the sector at large.

The company reported a 3.4% sequential increase in revenues and a 13.9% year-on-year rise to Rs 9,298 crore. However, EBIT margins came in 60 basis points above the market’s expectations as did earnings per share. In the third quarter, the company’s EPS increased 24.4% sequentially and 33.2% YoY to Rs 41.5.

Unlike the last few quarters, there has been no negative surprise from the company. Despite this the company’s stock fell soon after the company announced the results. The main reason behind this is the fourth quarter guidance, which expects revenues to remain flat in the fourth quarter. The company has indicated that its fourth quarter revenues will remain flat sequentially ($1.806-1.810 billion). Analysts are factoring in the FY13 dollar revenue growth at 16.4% YoY and EPS guidance at Rs 147.13. Analysts believe that numbers for FY13 may be revised downwards, after the management’s subsequent communications and fourth quarter performance.

Going by the volume growth, the weakness in North America is apparent even though Europe has grown by 16.8% in the quarter. Given that the company expects budgets to be closed only by the middle of February, the exact nature of business environment will probably become clear only after the fourth quarter. Few analysts have clarity on the stock’s performance going forward.

 

Infosys Q2 net up 10.8% to Rs 1,906 cr