Buy Infosys; target of Rs 1650: Emkay Global Financial

Emkay Global Financial's research report on Infosys

Infosys reported a disappointing revenue performance in Q4, and missed implied growth guidance. Revenue declined 3.5% QoQ in cc terms, falling short of our expectations. The management attributed 2/3rd of the sequential revenue decline to a lower pass-through revenue while observing some deal slippages; the remaining 1/3rd decline is ascribed to the seasonal volume drop. EBITM declined by 30bps to 21.0% due to wage hike, albeit coming in above our expectation. Large-deal TCV in Q4 was steady at USD2.6bn, of which 63% is net new. The company has guided to a wider 0-3% CC revenue growth range for FY26 (implying CQGR of 0.4-1.6%), considering the heightened uncertainty and increased cautiousness among clients in the current environment. The management indicated that guidance assumes normal seasonality at the upper end, while the lower end factors in risks of a weak start and some further deterioration in the macro environment. It has guided to EBITM band of 20- 22% for FY26, with an endeavor to improve its margin trajectory.

Outlook

We trim FY26- 27E EPS by 4.3-5.6%, accounting for the Q4 miss and FY26 guidance. We retain BUY while cutting our TP by +13% to Rs 1,650 at 23x Mar-27E EPS (earlier 25x).