Buy Infosys; target of Rs 1436: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Infosys

Daimler and Infosys Announce Strategic Partnership to Drive Hybrid Cloud-powered Innovation & IT Infrastructure Transformation in the Automotive Sector. The partnership will enable the Daimler to deepen its focus on software engineering and to establish a fully scalable on-demand digital IT infrastructure and anytime-anywhere workplace. The impressive deliverables of deal include 1) Create of zero-trust network, 2) building a smart hybrid cloud, 3) multi cloud journey,4) persona-driven and cognitive, AI powered anytime-anywhere workplace solution. We believe that Daimler deal truly highlights Infosys success in its large deal strategy & also helping client to navigate in every aspect of their digital journey. This deal also reinforces that companies are aggressively using digital transformation as a tool to reduce their cost & increase their productivity. The collaboration will strengthen Infosys’s automotive expertise. This is the second re-badging deal announced by Infosys in last one month, first being the outsourcing of ER&D services for Rolls-Royce’s civil aerospace business. This indicates an increasing in demand for outsourcing of IT & ER&D services by global companies to save costs.

Outlook

We value Infy at 27x due to following factors 1) Strong revenue acceleration 2) Best in class metrics along with broad based recovery 3) Excellent supply chain mechanism 4) Strong dividend payouts & 5) All time high deal wins. Infy is currently trading at 24X/22X FY22/23 earnings of INR 51/55.6 on FY22/23E respectively with revenue/EPS CAGR of 10.6%/9.5% over FY21-23E. Reiterate BUY.

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