Motilal Oswal: Infosys Q1 Shows Strong Surprise At Multiple Levels; Margin Reversion On Track
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Motilal Oswal Report
Infosys’ Q1 FY21 revenue and margin performance reflect its unparalleled resilience in navigating Covid-19-led disruption. Supply-side challenges were managed better than even TCS (10% impact for Infosys v/s 20% for TCS). Despite a higher variable payout (100 basis point impact), robust EBIT margin expansion over 150 basis point QoQ was a key positive.
We upgrade our FY21/FY22E earning per share estimates by 11% and 12% as we adjust our EBIT margin trajectory to the beat in Q1 FY21. Infosys should be a key beneficiary in terms of recovery in IT spends in FY22. Additionally, suboptimal EBIT margin levels and headroom for margin expansion, led by backended productivity benefits, should translate into strong outperformance on EPS growth.
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