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Will Infosys Q1 results beat TCS' numbers? Here's what analysts say

Topics Infosys  | Infosys result

Infosys campus
After Tata Consultancy Services (TCS) missed Street estimates on revenue and margin front, all eyes are now on Infosys that is slated to release its June 2019 quarter (April-June) results of the financial year 2019-20 (Q1FY20) on Friday. 

In line with TCS, Infosys, too, is likely to take a hit on EBIT (earnings before interest and tax) margin, owing to wage hikes, rupee appreciation and the ongoing investments, analysts say. 

Update on FY20E revenue guidance and margin trajectory, deal pipeline and demand commentary on operating verticals such as banking, financial services and insurance (BFSI) and digital are the key issues to watch out for in the result announcement. 

ALSO READ: Brokerages turn less bullish on TCS after company misses revenue forecasts

Meanwhile, Infosys' Q1FY20 results come at a time when Gartner, the US-based global research and advisory firm, has lowered its projection of worldwide IT spending growth in 2019 to $3.74 trillion. 

"Although an economic downturn is not the likely scenario for either 2019 or 2020, the risk is currently high enough to warrant preparation and planning. Technology general managers and product managers should plan out product mix and operational models that will optimally position product portfolios in a downturn should one occur," said John-David Lovelock, research vice president at Gartner. READ MORE HERE

For the June 2019 quarter, Infosys' revenue is expected to a 2.6 per cent rise in constant currency (CC) terms on quarter-on-quarter (QoQ) basis (2.2 per cent US dollar terms) to $3,127 million. Rupee revenue is projected to rise nearly 1 per cent, according to analysts at ICICI Securities. "EBIT margins may decline 110 basis points (bps) QoQ to 20.4 per cent, primarily," they say.

At the bourses, Infosys has remained subdued during the first quarter of FY19. Data fetched from the ACE Equity shows a 1.5 per cent fall in the stock price during this period. The Nifty IT index has risen 2 per cent while the Nifty50 index has gained 1.4 per cent between April-June. 

Analysts at Emkay Global have built in 2.5 per cent QoQ CC growth with cross currency headwinds of nearly 60 bps, translating into a 1.9 per cent revenue growth in US dollar terms. They expect EBIT margins to decline by nearly 70 bps QoQ to 20.7 per cent. Net profit is expected to fall 11 per cent QoQ to Rs 3,645.4 crore. On year-on-year (YoY) basis, the numbers are expected to grow 1 per cent. Net revenue is likely to increase 1 per cent QoQ (13.7 per cent YoY) to Rs 21,746.8 crore.

Analysts at Motilal Oswal see 330 basis points (bps) fall in EBITDA margin to 22.7 per cent. On a sequential basis, the numbers are expected to drop 120 bps. It estimates net profit, or PAT, to decline 12 per cent YoY and 10.3 per cent QoQ, respectively to Rs 3,700 crore. Net sales / revenue is seen growing 14.2 per cent YoY to Rs 21,900 crore. Sequentially, the numbers will see a growth of 1.4 per cent, the brokerage says.

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