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.
Outlook
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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