Broking houses retain ratings on Infosys despite better-than-expected Q2 results

MUMBAI: Broking houses have not revised their rating on the Infosys stock although the IT bellwether reported better-than-expected results. Analysts said that though the company has maintained its revenue guidance, they are cautious as faltering growth in US and Europe continues to be a cause for concern.

Infosys reported a net profit of Rs 1,906 crore in the quarter to September against a Bloomberg estimate of Rs 1,870 crore. All broking firms ET spoke to did not change their rating on the stock.

“The surprise was due to the rupee numbers. However, operationally, the Infosys management has maintained their guidance which has improved market sentiments,” said Dipen Shah, head of fundamental research, Kotak Securities.

Infosys Q2 revenues grew by 16.6% YoY and 8.2% QoQ. The quarter-on-quarter growth beat analyst expectations of 4-6%. The company said it expects revenue at the end of Q3 in the range of Rs 8,826-9,012 crore.

“Demand is seen intact for this year. So, volume growth assumptions have remained unchanged,” said Rajat Rajgarhia, director, research of Motilal Oswal Financial. “While there is no impact seen on current fiscal year financials, we have two quarters’ time to evaluate next year’s situation,” he said.

Infosys considered Rs 48.98 per dollar for calculating its rupee financials, which are “far fetched”. “Currency is always volatile and you can’t build a sustainable model at Rs 49 levels,” Rajgarhia said. In an analyst conference call after the results announcement, Infosys said that its rupee guidance could change if the rupee appreciates against the dollar.