Motilal Oswal's research report on Infosys
INFO reported a weak 4QFY23 revenue of USD4.55b, down 3.2% QoQ in CC terms, significantly below our estimate of 0.6% QoQ CC growth. This was primarily due to broad-based reduction in business volumes, led by unplanned project ramp downs and delays in new businesses during the early part of Q4. Additionally, the company saw one-off project cancellations and issues with a few clients, primarily on discretionary spending, which it expects to recover in 1QFY24. Further, TCV for large deals in 4Q stood at USD2.1b, down 37% QoQ. As a result of weak 4Q performance, INFO missed its FY23 USD revenue growth guidance of 16.0-16.5% YoY CC, delivering only 15.4% YoY. For FY24, the company has given USD CC revenue growth guidance of 4-7% YoY, citing increased uncertainty for the wider guidance band. This implies a CQGR of 1.5-2.5% between lower and upper end of guidance band, which we consider to be ambitious.
Outlook
Despite near-term weakness, we expect INFO to be a key beneficiary of acceleration in IT spends in the medium term. Based on our revised estimates, the stock is currently trading at 19x FY25E EPS. We value the stock at 21x FY25E EPS, implying a TP of INR1,520.
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