Infosys Q4 Results Review - One-Off Impacts The Quarter; FY25 Revenue Guidance Conservative: Systematix

Systematix Research Report

Infosys Ltd. posted weak Q4 numbers on one-off impact on re-negotiation of a contract. Adjusting for the same, FY24 revenue grew at the lower end of the guided range. Management’s revenue guidance for FY25 seems conservative and reflects-

1. no change to discretionary spending outlook for FY25, which continues to be weak at Q3 and Q4 FY24 levels,

2. seasonal weakness in H2 FY25, similar to FY24, and

3. lower manufacturing growth in FY25.

Management has given conservative margin guidance for FY25 (keeping it at a similar level of FY24) despite all levers (higher utilisation, rationalization of subcon, etc.) intact.

We estimate this could be to accommodate the impact of likely re-negotiations in some of the other contracts.

We have cut our revenue estimate to factor in the lower growth in FY25 and estimate 4.5% USD compound annual growth rate over FY23-26E.

We estimate margins in the lower half of the guided range (earlier estimated at the upper half) to accommodate any onetime impact that could arise.

We maintain Buy with a revised target price of Rs 1,660 (from Rs 2,000 earlier), based on 25 times FY26E EPS (reduced from 26 times to factor in the widened margin differential vs benchmark TCS).

Key risks to our assumptions:

1. Abrupt exit/s from the leadership team,

2. sustained pressure on client discretionary spending in FY26,

3. continued re-negotiation of contracts impacting revenue and margins.

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