Buy Infosys; target of Rs 1600: Motilal Oswal

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Motilal Oswal's research report on Infosys

Infosys (INFO) reported constant currency (CC) USD revenue growth of 5.3% QoQ (v/s our estimate of 3.2%) in 3QFY21. This is its best QoQ growth in the last eight years. Growth was broad-based across verticals and regions. In 9MFY21, revenue (USD)/EBIT/PAT grew by 3.8%/26%/16.4%. The company reported its best ever TCV of USD 7.1b (net new wins of 73%), 2x book-to-bill, and above the combined TCV of the last three quarters. While we see a large impact from the Daimler win, other deal wins were much ahead of our estimate. We see the exceptional deal TCV as a meaningful driver of INFO's FY22 topline growth (+18% YoY), even after factoring in the impact from pass-through of revenue in large deals.

Outlook

INFO has outperformed TCS in 9MFY21 and is on its way for industry leading performance in FY21 (among Tier I players), we expect the valuation divergence to narrow. Based our revised estimates, the stock is currently trading at 21x FY23E EPS. We value the stock at 24x FY23E EPS, implying a target price of INR1,600.

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