Why Infosys Shares Are Down Even As Q4 Profit Beat Estimates

Infosys‘ share price was down in the red after the company’s Q4 results disappointed investors and analysts.

What Happened: The IT services reported revenue from operations of ₹37,923 crore, marking a 14% increase from ₹33,141 crore in the same quarter last year. The net profits for the IT services giant stood at ₹7,969 crore, which is a 30% rise from ₹6,128 crore in the corresponding quarter last year. This figure surpassed street estimates, which were around ₹6,100 crore.

However, the company had other income of around ₹2,729 crore. The other income includes interest on income tax refund of ₹1,916 crore and ₹2 crore for the quarter ended March 31, 2024 and March 31, 2023 respectively, ₹1,965 crore and ₹3 crore for the year ended March 31, 2024 and March 31, 2023 respectively, and ₹42 crore for the quarter ended December 31, 2023.

The operating margin for the company was 20.1%. For the year ending March 25, the company has projected a revenue growth of 1%-3% in constant currency. Additionally, the company expects the operating margin to be in the range of 20%-22%.

Brokerage Reactions: The company’s results got mixed reactions from analysts. UBS maintained its “buy” rating for the stock but cut the target price to ₹1,700 from ₹1,800. The brokerage said that the Q4 numbers missed its estimates and the guidance also disappointed.

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JP Morgan maintained its “overweight” rating for the stock but also cut the target price to ₹1,700 from ₹1,800. The analysts said that Q4 was an all-around miss.

Jefferies also maintained its “buy” rating for the stock with a price target of ₹1,630. The company said that the company missed estimates mainly due to the 2.2% quarter-on-quarter decline in revenue in constant currency terms. The analysts also said the revenue growth guidance was weak.

Emkay also maintained its “buy” rating for the stock cutting the price target to ₹1,750 from ₹1,850. The brokerage firm said that the company posted a miss on operating margin and the guidance was also lower than expected.

Investec maintained its “hold” rating for the stock revising down the price target to ₹1,540 from ₹1,640. The analysts said that the weak revenue guidance, despite record deal wins, is due to longer-tenured deals and a challenging discretionary spending environment. The brokerage firm said that it’s hard to predict a recovery in discretionary spending but noted that historically such recoveries are usually sudden.

Price Action: Infosys’ share price was down 2.05% to trade at ₹1,390.15 as the markets opened on Friday.

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