Infosys will be coming out with its first quarter FY08 numbers tomorrow. Investors are worried that an appreciating rupee, currently at Rs 40.41 against the dollar, will impact the company's revenues.
Most tech companies have a major portion of their revenues billed in dollars, and any major fluctuations in the rupee's movement could severely impact margins.
What do analysts foresee for Infosys tomorrow?
Sanju Verma, Head-Institutional Broking, HDFC Securities, said she would be positively surprised if the management sticks to its guidance, which it had given last time around.
"I would be positively surprised if the management sticks to its guidance of Rs 80, which they had given last time around. I think that is a big positive given that we are entering Infosys' results with a huge amount of skepticism in the market. I have been talking to people who are actually talking of the guidance, in terms of EPS for FY08, being revised downwards by the management to anywhere between Rs 76 and Rs 78. I believe that they will stick to Rs 80," she added.
Verma feels the company might actually increase its revenue guidance in dollar terms for FY08. "They might actually increase their revenue guidance in dollar terms for FY08 from the earlier USD 4.02 billion to USD 4.3 billion going forward. That is our house view. What a lot of people have not bargained for is the fact that while the rupee has appreciated by about 7% in the last quarter, wage and visa costs have gone up for Infosys. All of which will impact margins to the tune of a whopping 350 bps. Billing rate growth YoY is likely to be about 5% and utilization rate, which is the most important parameter, is also likely to see a 2% growth. If both these come on track then it could be a huge positive," she added.
Sandeep Nanda, Head of Research at Sharekhan, expects a decline of about 9% QoQ. "Our estimate is about 9% QoQ decline in earnings. I think that is at the lower end of the band. We played around with our earnings model on Infosys and depending on pricing and how much efficiency they can take, they will be between 4-9% QoQ decline, that's what our estimate seems to suggest. For the full year, we have an estimate of about Rs 81, which is inline with consensus. Key thing would be what the management tells us about Q2 and the forward outlook. If they say good things on pricing and volume, that should cheer-up people," he added.
Technical Analyst, Ashwani Gujral expects to see a strong relief rally in the Infosys' counter. "I believe Rs 1,900 is a strong support now and probably the market would give it a 10% bounce. Infosys will do whatever it has to do. From this position it is quite oversold and a relief rally should be expected," he added.
What do brokerages expect Infy to do tomorrow?
- Kotak Securities expects Infy's net profit to decline 2.8% at Rs 991.2 crore as against Rs 1,020 crore QoQ.
- JP Morgan sees the tech bellwether's consolidated net profit down 3.9% at Rs 965 crore with net sales up 2.9% at Rs 3884.1crore QoQ.
- Motilal Oswal Research expects to see a decline in Infy's net profit at 14.5% at Rs 978.2 crore YoY. It sees net sales up 1.7% at Rs 3837.7crore in the corresponding quarter last year.
- P-Sec expects the tech major to post a net profit of Rs 1001.7 crore as against Rs 1,142 crore in Q4 FY07, on QoQ basis.
- ABN Amro sees Infy's net profit down 4% at Rs 978.8 crore QoQ.
Tech companies are mostly trading in the green today. Infy is up 1.72%.
Company Name Open Last traded price Prv close % Chg
526 524.9 525.05 -0.03
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