Buy Infosys; target of Rs 1350: ICICI Direct

ICICI Direct's research report on Infosys

Infosys reported healthy set of Q2FY21 numbers on the revenue and profitability front. Revenues increased 4.0% QoQ vs. our estimate of 3.3%. The company also reported healthy EBIT margin of 25.3% (vs. our estimate of 23.8%). Digital revenues increased 12.9% QoQ, 27.5% YoY and now account for 47.3% of overall revenues. The large deal pipeline increased 80.7% QoQ mainly due to addition of Vanguard deal. Further, Infosys has outperformed Tata Consultancy Service (TCS) in terms of revenue growth in YoY terms in which TCS’ dollar revenues declined 1.7% YoY vs. Infosys, which increased by 3.2% YoY in Q2FY21. In terms of guidance, Infosys has revised its FY21E revenues guidance upwards from 0-2% YoY to 2-3% YoY & operating margin guidance to 23-24% from 21-23%.

Outlook

We remain positive on the stock and maintain our BUY rating on the stock with a target price of Rs 1350/share.