Sharekhan's research report on Infosys
Infosys’ strategic investments on digital capabilities have helped it gain market share over last three years and boosted its ability to participate in mega transformation deals. Management indicated that revenue would not be materially impacted Q1FY2022 because of the second COVID-19 wave. Transition costs of a large deal could however hit margins in Q1FY2022, partially offset by revenue growth and higher offshoring. FCF increased 44% y-o-y to Rs. 22,020 crore in FY2021, implying an FCF/EBITDA ratio of 79%. Further, Infosys returned 83% of its two-year FCF to shareholders through dividends and buybacks, in line with its current capital allocation policy.
Outlook
We retain a Buy rating on Infosys with a price target of Rs. 1,700, given strong revenue growth and deal momentum and faster recovery in developed markets.
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