Infosys Q1 Results: Brokerages Stay Bullish Despite Margin, Attrition Woes
Workmen prepare an electronic screen at the Infosys Ltd. (Photographer Jason Alden/Bloomberg)

Infosys Q1 Results: Brokerages Stay Bullish Despite Margin, Attrition Woes

Most brokerages remained bullish on Infosys Ltd. after the first quarter results, citing growth across verticals and geographies, healthy deal traction and rising client spends towards digital services.

The information technology company saw its revenue rise 6% over the preceding quarter to Rs 27,896 crore in the three months ended June. IT even raised its FY22 constant currency growth guidance to 14-16% from 12-14%, according to its exchange filing.

Infosys’ margin contracted during the quarter because of wage hikes. But the company maintained its operating margin forecast for the ongoing fiscal at 22-24%.

The company plans to hire around 35,000 freshers in FY22. “As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge,” said Pravin Rao, chief operating officer at Infosys.

Analysts, too, highlighted supply-side pressure on margin and high attrition as major concerns for the company, besides rupee appreciation, regulatory concerns around H-1B visas, among others.

Shares of Infosys slipped 0.22% to Rs 1,573.50 apiece around 9:20 a.m. on Thursday. Of the 49 analysts tracking the Bengaluru-based IT company, 43 recommend a ‘buy’, and three each suggest a ‘hold’ and a ‘sell’, according to Bloomberg data.

Infosys’ stock has gained 6.62% over the last month, and nearly 25% so far this year. The consensus 12-month target price of analysts tracked by Bloomberg implies an upside of 8.5% from current level.

Also read: Infosys Q1 Results: Raises FY22 Revenue Growth Guidance On Large Deal Wins; Margin Contracts

Here's what analysts have to say about Infosys' June-quarter results...


  • Maintains ‘buy’ with a 12-month price target of Rs 1,900 apiece.

  • Rising fulfilment costs weigh on an otherwise buoyant outlook.

  • Expects margin pressure in Q1FY22 to be a near-term irritant than a structural concern.

  • Infosys remains the preferred play due to growing digital spending and market share gains.

  • Infosys continues to remain part of CLSA India focus buy list.

  • Ongoing share buyback to lend downside support.

Dolat Analytics & Research

  • Retains ‘reduce’ with a target price of Rs 1,570 apiece.

  • Revenue growth momentum driven by strong execution across verticals.

  • Strong Q1 earnings led to upgrade in growth guidance for FY22 by 200 basis points.

  • Pipeline remains strong as clients continue to focus on digital transformation, cost take-outs and captive monetisation.

  • Upgrades growth estimates by 22.8% in FY22 due to robust TCV wins, anticipation of continued strong performance, confident commentary and upgrade in guidance.

  • Revenue growth estimates scaled up by 2.8%/3.6% for FY22/FY23E, respectively.

  • Expects sequential growth of 3% in U.S. dollar revenue in Q2 owing to estimated strong performance across verticals, healthy deal traction and pipeline due to higher client spends towards digital transformation.

  • Infosys and other tier-1 IT companies would continue to deliver strong revenue momentum over the next four-six quarters.

  • Current valuations of 25x-30x implying over 2x-2.5x on PEG basis to be sustainable.

Key Risks

  • Contraction of 81bps QoQ in operating profit margin due to supply-side impact that negated gains from improved utilisation, offshore shift and forex gains.

  • Most of the gains likely to get negated due to lower operating profit margin assumption.

  • Margin concerns likely to extend in coming quarters given the upcoming headwinds in the form of wage hike, promotions, recovery in discretionary spends and the need for lateral hiring.

  • Sees limited scope for operating profit margin recovery.

Also read: Infosys Q1 Review - Growth Momentum Drives Guidance Upgrade, Margin Slip Neutralises: Dolat Capital


  • Recommends ‘buy’ with a 12-month target price of Rs 1,800 apiece.

  • Upgrade in FY22 revenue growth guidance to 14-16% constant currency on the back of broad-based demand, solid intake and healthy deal pipeline.

  • Healthy large deal intake and pipeline with a good mix of new and renewal deals to offer good revenue visibility.

  • Tweaks earnings estimates by -2.2%/0%/0.2% for FY22/FY23/FY24.

  • Key Risks: Spike in attrition.

Goldman Sachs

  • Maintains ‘buy’ with a 12-month price target of Rs 1,781 apiece.

  • Strong demand for digital services aided revenue growth in June quarter.

  • Infosys’ strategy to capture demand at the cost of margins is an apt strategy.

  • Strong order book and deal pipeline to continue to aid revenue growth.

  • Modestly increases revenue growth estimates and forecasts 17% constant currency revenue growth for Infosys in FY22E.

  • Key Risks: Pricing pressure in non-digital business intensifying amid competition, weak end-market demand in banking and retail verticals, rupee appreciation over the U.S. dollar and tighter regulations around H-1B visas approvals.


  • Recommends ‘hold’ with a target price of Rs 1,550 apiece.

  • Margin headwinds weighed on strong revenue performance.

  • Salary hikes and stronger hiring to impact utilisation and weigh on Ebit.

  • Revenue growth in the upcoming quarter to be stronger to due to revenue accretion from the Daimler deal.

  • Cuts FY22E EPS by 1% and increases FY23E EPS by 2% due to expectations of better growth and higher margins.


  • Maintains ‘buy’ with a target price of Rs 1,800 apiece.

  • June-quarter earnings mixed with positive surprise on revenue growth.

  • 80 bps QoQ fall in margins ‘disappointing’.

  • FY22 revenue growth guidance likely to be raised further.

  • Tweaks FY22-24 estimates due to healthy deal pipeline and broad-based growth.


  • Maintains ‘outperform’ with a 12-month target price of Rs 1,740 apiece.

  • Revenue guidance indicative of strong deal wins and robust demand environment.

  • Hiring and salary hikes remain near-term margin headwinds.

  • Marginally raises FY23E EPS by 2.5%.

  • Infosys remains top pick in large-cap Indian IT space as well a marquee buy idea.

  • FY22E revenue growth guidance raised above expectations.

Morgan Stanley

  • Maintains ‘overweight’ with a price target of Rs 1,800 apiece.

  • High bull-case probability driven by strong growth momentum and improvement in spending environment in IT industry.

  • Revenue growth significantly better than top end of FY22 revenue growth guidance.

Key Risks

  • Rupee appreciation and regulatory risks pertaining to visas in the U.S.

  • Disruption in operations from Covid remains a major concern.

Motilal Oswal

  • Recommends ‘buy’ with a target price Rs 1,770 apiece.

  • Expects a further upward revision in Infosys’ revenue growth guidance.

  • Robust demand environment, broad-based growth and healthy deal pipeline to aid earnings.

  • Higher subcontracting expenses, employee cost due to attrition led to Ebit margin compression.

  • Hike in revenue growth guidance characterized by strong demand.

  • Revises FY22E/FY23E EPS estimate by 3.2%/1.6% downwards to encompass the margin pressure due to supply side crunch in the industry.

  • Infosys to be a key beneficiary of recovery in IT spends in FY22.

  • Key Risks: Sharp rebound in attrition and unsustainable high utilisation leaves likely to have an adverse impact.

Nirmal Bang

  • Recommends ‘accumulate’ with a target price of Rs 1,614 apiece.

  • Pressure on the margin front even before annual wage hikes from July 1 and transition-related costs related to the mega Daimler deal.

  • Revenue growth guidance for FY22 raised to 14-16% in constant currency terms due to strong demand and deal pipeline.

  • Expects margin recovery in the second half of FY22 due to higher pyramid structure, offshore mix, lower subcontractor use, automation and better pricing.

  • Buyback announced by Infosys likely to support its stock price in the near term.

  • Focus on value delivered to clients to improve pricing on a structural basis.

  • Negative surprise on the margin front unlikely from here on in FY22.

Prabhudas Lilladher

  • Recommends ‘buy’ with a target price of Rs 1,832 apiece.

  • Strong revenue growth offset by weak margin performance.

  • Flex of margin levers unlikely to completely offset cost increase.

  • Cuts estimates by 3%/1.6% in FY22/FY23E due to margin headwinds and the assumption of 23.7%/23.2% EBIT margin in FY22/FY23E.

  • Better pricing for new digital deals to aid margins in the coming quarters.

  • Sequential growth in retail, manufacturing, BFSI, communications segments a positive trigger.


  • Maintains ‘neutral’ with a 12-month price target of Rs 1,450 apiece.

  • With another margin compression likely in Q2, consensus earnings could see more cuts even as revenue forecasts improve.

  • Expects Infosys to close the valuation gap to TCS as markets typically ignore margin misses with positive revenue surprises.

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