Accumulate Infosys; target of Rs 900: Dolat Capital

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Dolat Capital's research report on Infosys

INFY reported a revenue de-growth of 2.0% CC QoQ (DE: 4.8% CC de-growth) led by strong deal conversion, execution and lower supply side impact (20bps) along with 150bps QoQ improvement in OPM at 22.7% led by prudent cost-saving measures despite higher variable payouts. INFY re-introduced revenue guidance band (0-2%) and OPM band at 21-23% for FY21. Growth confidence revived as clients continue to invest in cost take-outs & digital transformation deals, captive takeover and vendor consolidation; driving up its deal pipeline momentum. Confidence on profitability would clear overhang of consistent past dilutions that it has seen and will be seen as its new base level OPM. Infosys reported TCV of $1.74Bn (19% is New) was slightly below expectations.

Outlook

However, Pipeline of deals, high number of large deals (15) and fair mix of deal wins across verticals gives confidence (5 in BFS). Exceptional results, strong deal wins and guidance restoration has boosted confidence both on growth, OPM stability, lower risk and sustained momentum. Superlative performance has led to upward revision in our EPS estimate by 5% for FY21/22E and an upgrade in rating to Accumulate with TP of Rs 900 (20x FY22E EPS – 10% disc to TCS).

For all recommendations report, click here

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