Infosys share price: 2 key reasons why Jefferies expects 17% upside despite weak Q4 Results
Infosys share price: Jefferies expects 17% upside despite weak Q4 Results reported by the company on Thursday, post market hours. The concerns on IT sector already have remained elevated as trade war and tariff uncertainties have led to cautious approach of investors assesing impact on client spendings etc.
Infosys Q4 Results
On Thursday, April 17, the IT leader Infosys saw its consolidated net profit for Q4FY25 having declined 11.75 percent year-on-year (YoY) to ₹7,033 crore. The company had reported ₹7,969 crore in the same period previous year. Nonetheless, the company’s operating revenue for the reviewed quarter increased 8% year over year to ₹40,925 crore from ₹37,923 crore in the same quarter of the previous fiscal year.
In constant currency terms, Infosys revenues though grew 4.8 per cent YoY however on the sequential basis they declined by 3.5 per cent
Revenue miss disappoints– It was the Revenue sequential decline that drove the disappointment. Revenues, down 3.5% sequentially and in constant currency terms was the key negative surprise said Jefferies India Pvt Ltd , who added that Infosys’ 4QFY25 results disappointed.. Infosys’ 4.2% YoY constant currency growth in FY25 missed its guidance range of 4.5%-5.0%.
The Q4 revenue was impacted due to higher-than-expected reduction in pass-through revenues (2/3rd of decline) besides the usual seasonality, said Jefferies. Infosys witnessed sequential revenue decline in six out of its eight verticals
2 Key reasons why Jefferies expects upside
1.Margins beat estimates: Despite the impact from wage hikes in 4Q, margins were down mere 30 basis poin sequntially to 21.0%. Whilst higher employee costs impacted margins, lower pass-through costs and lower overheads limited the margin decline in 4Q. Infosys has guided for margins to be in the range of 20-22% for FY26, in line with expectations. Jefferies have raised their FY26 and FY27 margin estimates by 10-20bps to factor in margin beat and expect margins to rise to 21.5% by FY28.
2. Attractive risk-reward; Jefferies has given buy ratings for Infosys. While they have cut their FY26 and 27 EPS estimates by 2-3% to factor the revenue miss they now expect Infosys to deliver 9% EPS CAGR over FY26-28. Their analysis suggests FY27 EPS (Earnings per share) may range between Rs67 to Rs76 . This as per Jefferies implies a bear case value of Rs1,340 and bull case value of Rs1,980. At current market price this implies 5% downside & 40% upside, making risk-reward very attractive, said Jefferies. Jefferies Maintain Buy with revised price target of Rs1,660 based on 23x Price to earnings.
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