The key thing to watch out for during Infosys earnings will be the size of the new deals

Infosys Q1 previewIANS
  • Infosys is expected to fare better than its peers during the first-quarter earnings.
  • The Indian IT services company is slated to announce its results on July 15.
  • All eyes will be on the value of Infosys’ large deals between April through to June, according to analysts.
Infosys is set to post its first-quarter results on July 15 and — as compared to other Indian IT services companies — Infosys is likely to show the least amount of dip in its revenues this quarter, according to analysts.

BrokerageExpected drop in revenue QoQ
Motilal Oswal-4.8%
IDBI-5.7%
ICICI Securities-5.5%
Nirmal Bang-5%
Source: Preview reports

Ahead of its earnings announcement, Infosys share price jumped by more than 8% on Wednesday morning.
Infosys share jumped by 8% on Wednesday morning ahead of earnings results announcementBSE/BI India

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Margin impact, in particular, is likely to be limited relative to peers. IDBI Securities expects earnings before interest and tax (EBIT) margin to decline by 45 basis points (bps) this quarter. For TCS, the EBIT margin fell by 148 bps. That’s 1.48% since 100 basis points make up 1%.

According to IDBI’s preview, the decline may even have been greater, “but for 50bps impact in Q4FY20 due to provisions for receivables and higher CSR [corporate social responsibility] spend,” it said.

Infosys share price this yearBSE/BI India

Infosys’ share price is up by 8% so far this year. Despite the massive hit it took when news of the coronavirus pandemic broke, the company’s stock value has managed to recuperate to ₹796.7 as of Monday.
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StockPrice change in 2020 so far
Infosys8.25%
HCL Tech5.38%
TCS2.29%
Wipro-8.19%
Tech Mahindra-21.24%
Source: BSE, closing price on Jan 01 compared the closing price on July 13

Keep an eye on large deal wins
All eyes will be on the value of Infosys’ large deals between April through to June, say analysts. “Our sense is that large deal TCV [total contract value] will likely be between $1 to 1.5 billion,” said Nirmal Bang in its preview. In comparison, TCS was able to bag $8.9 billion worth of contracts in its first-quarter.

The earnings will show whether the deal wins are new deals or renewals. “The latter has been a sore point for Infosys in recent quarters with a larger portion of the TCV being renewals compared to FY19,” Nirmal Bang’s report added.
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Nonetheless, the manufacturing and auto verticals are likely to see continued pressure, according to Motiwala Oswal.

SEE ALSO:
Tech Mahindra, Intel, Wipro and other multinationals hiring engineers

TCS and Infosys to face least impact — Indian IT companies likely to report sharp decline in revenue during first quarter

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