Accumulate Infosys; target of Rs 1543: Arihant Capital

Arihant Capital's research report on Infosys

Infosys Q3FY21 earnings were above our estimates on all fronts. Consolidated revenue stood at Rs 25,927 Cr, registering +12.3% YoY/5.5% QoQ. Consolidated EBIT stood at Rs 6,589 Cr, up by 30.1% YoY/5.8% QoQ. On the margins front, EBIT margin improved by 348bps YoY/7bps QoQ to 25.4%.. Revenue and margin guidance band increased to 4.5%-5.0% and 24.0%-24.5% respectively on the back of continued strong performance. Consolidated PAT saw a rise of 7.3% YoY to Rs 5,215 cr vs 4,466 Cr in Q3FY20. Infosys has delivered highest QoQ growth of 5.3% in the last 8 years in constant currency. Digital revenues grew by 31.3% and overall digital revenue crossed more than half of total revenues.

Outlook

We believe , Infosys will continue to perform well. Considering, its significant contribution from cloud and digital, remains a major beneficiary of this tech upcycle. At CMP of Rs 1371, Infosys currently trades at FY20 P/E of 35x. We value Infosys at P/E of 28x to its FY22E EPS 55, which yields target Price of Rs 1543 per share. We change our rating from Hold to Accumulate.

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