Accumulate Infosys; target of Rs 1500: Dolat Capital Market

Dolat Capital Market's research report on Infosys

Infosys reported a revenue growth of 5.3% QoQ in CC terms (DE 3.8%) due to strong execution across verticals and a 5bps QoQ OPM improvement to 25.4% (DE 24%) led by better utilization and offshore shift (about 100bps), Fx (20bps) that covered up for headwinds. Strong Q3 also led to upgrade in growth guidance for FY21 to 4.5%-5% in CC terms (up 200bps) and OPM guidance to 24-24.5% (from 23-24%). OPM upgrade came as bigger surprise given expected headwinds in terms of Jr. employee promotions, large deal transitioning etc. in Q3. Signed best ever TCV of $7.1Bn (73% of this is New) taking TTM TCV to $13.6Bn up 53% on YoY basis. Pipeline remains strong as clients are focusing on digital transformation, cost take-outs and captive monetization and so on.

Outlook

Factoring strong performance, robust TCV wins, confident commentary and upgrade in guidance/outlook, we have upgraded our growth estimates by ~1.5% CAGR FY21-23E and have assigned Accumulate view on stock with TP of Rs. 1,500 (27x on FY23E EPS).