Thread by @ICICI_Direct

Infosys' ADR has fallen by ~9.8% after Q4FY23 results📉🔻

We maintain a BUY rating, but have reduced our target

In this thread we discuss:
🔸Results
🔸Guidance
🔸Our view and
🔸TARGET

A thread🧵👇

#Infosys #LearnWithICICIDirect #ICICISecurities

[1] Revenue Growth – Q4FY23

In CC terms:
🔸Grew 8.8% YoY📈
🔸Dropped 3.2% QoQ📉🔻

🔸Major miss from our estimates of +0.1%/0.3% QoQ CC growth

🔸This resulted in miss in FY23 revenue growth at 15.4% YoY CC vs guidance of 16-16.5%

🔸Due to unplanned project ramp downs

[2] EBIT Margins - 21% for Q3FY23

🔸Decline of 0.5% QoQ
🔸Decline of 0.6% YoY

🔸Decline in margin was due to dip in utilisation and unexpected fall in revenue

🔸Margins are lower by 50 bps QoQ from our estimates of 21.5%/21.7%

[3] Employee utilisation

🔸Employee utilisation was at 76.9% lower by 20bps QoQ🔻

🔸Lower utilisation leads to lower margins📉

🔸We believe that employee utilisation has scope for improvement

[4] Attrition

🔸Voluntary Attrition in IT services has cooled-off from 24.3% in Q3FY23 to 20.9% in Q4FY23📈

[5] Guidance

🔸Revenue guidance of 4-7% CC on YoY basis for FY24
👉Lower than our estimate of 6-8%

🔸Margin guidance at 20-22%
👉Lower than our estimate of 21-23% for FY24

Guidance factors
🔸Headwinds from compensation & travel cost
🔸Tailwinds from utilisation, automation etc

[6] Our View

🔸We lower our target by 7% from ₹1,759 to ₹1,641

🔸Maintain BUY rating: 18% upside from CMP

🔸Key risk to our thesis: Double-digit revenue growth due to demand drivers for the industry

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TL;DR
[1] Revenue Growth – Q4FY23
[2] EBIT Margins - 21% for Q3FY23
[3] Employee utilisation
[4] Attrition
[5] Guidance
[6] Our View

Disclaimer: bit.ly/fulldisclaimer