Buy Infosys; target of Rs 1355: Motilal Oswal

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Motilal Oswal 's research report on Infosys

Overall, the commentary from Infosys was quite positive as the management expressed a) their confidence about returning to pre-COVID growth levels; b) scope for a further upside on operating margins; c) significant opportunity from the shift to cloud; d) acceleration in the deal pipeline since the pandemic. It further highlighted the ambition to eventually have 33% of the workforce operating flexibly/remotely, which should help lower capex and D&A expenses. At the board level, the Infosys chairman reiterated the board's confidence in the management and expressed the willingness to retain their position as long as necessary. This should mitigate any remnant concern related to the management and board's stability. Infosys' outlook for a large wave of technological investment is in line with our expectation. This should lead to a strong demand outlook for the IT Services industry in the medium term.

Outlook

Infosys should narrow the divergence in its valuation with TCS to 10%. On our estimates, the stock is currently trading at 21x FY22 EPS. We value the stock at 25x FY22E EPS (10% discount to TCS). Reiterate Buy.

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