Buy Infosys; target of Rs 1640: Emkay Global Financial

Emkay Global Financial is bullish on Infosys has recommended buy rating on the stock with a target price of Rs 1640 in its research report dated July 25, 2022.

Broker Research

September 29, 2022 / 11:03 IST

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Emkay Global Financial's report on Infosys

Infosys reported mixed performance in Q1, with revenue beating our estimates and margin missing our expectations. Revenue grew 3.8% QoQ to USD4.44bn (5.5% CC), driven by broad-based demand. EBITM declined 150bps to 20.1% due to increased cost pressures. The company raised its FY23 revenue growth guidance to 14-16% CC (13-15% earlier), implying a 1.4-2.6% CQGR over Q2-Q4, on the back of strong Q1, broad-based demand, solid deal intake and pipeline. It has retained EBITM guidance at 21-23%, but expects it to be at the lower end of guided range, considering Q1 performance and cost woes. Though large deal intake has moderated, it was healthy at USD1.7bn in Q1. As per management, large deal pipeline expanded in the last 3-6 months. Healthy large deal wins, progress on client mining and robust deal pipeline give good growth visibility for FY23.

Outlook

We cut FY23/FY24/FY25E EPS by 1.9%/0.1%/0.1%, factoring in the Q1 performance. The margin miss should lead to our/consensus earnings downgrades, though revenue beat estimates. We maintain Buy with a TP of Rs1,640 (23x Jun’24E EPS), considering continued market share gains, expected margin recovery, and steady cash generation.

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