Accumulate Infosys; target of Rs 1531: KR Choksey

KR Choksey's research report on Infosys

Infosys announced relatively underwhelming Q4FY24 results, with revenue falling short of our expectations, while profits exceeded our forecasts largely on the back of substantial other income. Revenue of INR 3,79,230 Mn (+1.3% YoY) was led by growth in the Communication (+4.2% YoY), Energy, Utilities, Resources & Services (+1.5% YoY), and Hi-Tech (+8.7% YoY) segments, although it fell short of our estimates by 3.2%. EBIT of INR 76,210 Mn (+2.4% YoY) fell behind our estimates by 6.1% due to higher-than-expected cost of sales; EBIT margins contracted by 94 bps YoY. PAT jumped by 30.5% YoY to INR 79,750 Mn due to a significant increase in other income; PAT margins improved by 465 bps YoY. In Q4FY24, the attrition rate stood at 12.6%, exceeding our base case estimate of 11.2% by 140 bps. We apply a reduced multiple of 21.0x on FY26E EPS to reflect top-line weakness and margin pressure. We lower our Target Price (TP) to INR 1,531 per share, with an ACCUMULATE rating.

Outlook

Accordingly, we reduce our Target Price to INR 1,531 per share (previously: INR 1,772), which implies an 6.9% upside over the CMP. We reiterate our “ACCUMULATE” rating on the shares of Infosys.