The share price of this IT company which deals in the business of consulting, outsourcing technology, and next-generation digital services was down by 6 percent on Friday after quarterly financial results and guidance announcements. Is it the right time to buy after the fall?
Share Price Movement
In Friday’s trading session, Infosys Ltd‘s share price touched a day’s low of Rs. 1,812, which was down by 6.03 percent. The share price reiterated from the day’s low and was trading at Rs. 1,814.70, which is 5.90 percent lower than the previous closing price of Rs. 1,928.45. In the past year, the stock has delivered around 10.75 percent and has outperformed the Nifty Index.
Q3FY25 Results
The company’s stock was down after it released its quarterly financial results and raised the guidance outlook for FY25.
In its latest filing for the quarter ending December 2024, the company reported a 7.58 percent rise in revenue, reaching Rs.41,764 crore compared to Rs.38,821 crore in Q3 FY24. On a quarter-over-quarter basis, the operational revenue rose by 1.89 percent from Rs.40,986 crore in Q2FY25.
During the same period, net profit increased by 11.59 percent to Rs.6,822 crore in Q3FY25, compared to Rs.6,113 crore in Q3FY24, and increased by 4.69 percent from Rs.6,113 crore in Q2FY25.
In Q3FY25, the company’s revenue from Financial Services contributed around 27.74 percent, Retail contributed around 13.75 percent, Communication contributed 11.22 percent, Energy contributed 13.49 percent, Manufacturing contributed 15.51 percent, Hi-Tech contributed 7.85 percent, Life Sciences contributed 7.65 percent, and the remaining 2.76 percent from others. The new deal bookings in the Q3FY25 stood at $2.1 billion across services and software. The guidance for FY25 was set at 4.5 to 5 percent (constant currency) and EBIT margin guidance at 18 to 19 percent.
Management Commentary
Infosys CEO and Managing Director Salil Parekh said “Our strong revenue growth sequentially in a seasonally weak quarter and broad-based year-on-year growth, along with robust operating parameters and margins. We continue to strengthen our enterprise AI capabilities, particularly focusing on generative AI, which is witnessing increasing client Traction. This has led to another quarter of strong large deal wins and improved deal pipeline giving us greater confidence as we look ahead”.
Guidance Update & Deal Win
The company gave FY25 guidance for revenue of 4.5 percent to 5 percent in constant currency terms and an operating margin of 20 percent to 22 percent in Q3FY25. Infosys had provided 3.75 percent to 4.50 percent in Q2FY25 thus raising guidance in the current quarter. The company won a $2.5 billion Large Total Contract Value deal in Q3FY25.
Brokerage Target
Jefferies, a global reputed brokerage firm has covered the stock and assigned a rating. The brokerage firm has a ‘Buy’ rating with a target price of Rs. 2,250 per share. Jefferies said strong revenue growth is a positive surprise including a strong deal win and discretionary spending to bode well with growth. They increased earnings estimates by 2 percent and expect EPS to grow at 11 percent CAGR in FY25 to FY27.
Written by – Santhosh S
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