Emkay Global Financial is bullish on Infosys has recommended buy rating on the stock with a target price of Rs 1360 in its research report dated October 14, 2020.
Emkay Global Financial's report on Infosys
Infosys delivered another stellar quarter, beating consensus estimates on revenue and margins. Revenue grew 6.1% QoQ to $3.3bn. EBITM expanded 270bps to 25.3% (highest quarterly margin since Q4FY16). Strong operating performance led to a net profit beat. For FY21, Infosys raised its revenue guidance to 2-3% YoY cc (from 0-2%) and EBIT margins range to 23-24% (from 21-23%). Its full-year outlook implies a 0.5-1.7% CQGR over the remaining two quarters. Large deal signing remained robust with deal TCV of $3.15bn in Q2 (net new share 86%), highest ever for the company. Net new deal TCV grew ~59% YoY in H1. Infosys continues to outperform TCS in terms of revenue growth (4.8% YoY cc on TTM basis vs. -0.1% for TCS), with the margin differential also narrowing.
We expect Infosys valuation gap with TCS to narrow further (trades at ~15% discount vs. >30% in early CY20) with sustained strong operating performance. We assume coverage on the stock with Buy and a TP of Rs1,360 at 25x Sept’22E earnings.
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