Buy Infosys; target of Rs 1730: Sharekhan

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26 Aug, 2025 12:21

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Infosys reported decent CC revenue growth of 2.4% q-o-q and 13.7 % y-o-y, 90 bps higher than our estimates, led by growth across digital business and core services. EBIT margins remained resilient at 21.5%, as cost optimisation and INR depreciation were fully offset by higher SG&A, furlough and third-party costs. Deal wins were strong with TCV for Q3FY22 being strongest in the past eight quarters at $3.3 billion. The management revised upward its revenue growth guidance to 16-16.5% in CC terms for FY2023 versus 15-16% earlier. The management expressed weakness in mortgage, investment banking, Telco, Hi-tech and Retail verticals and said clients here are looking at cost optimisation rather than digital transformation programs. Despite strong growth in Europe and North America at 13.6% and 10% q-o-q, respectively, the management has indicated that the outlook for Europe is concerning, while it is relatively better for the US.

Given looming global headwinds, the outlook for FY24E looks uncertain and with gradual recovery in the coming quarters. However, we believe the structural growth story for the Indian IT sector remains intact. We maintain a Buy rating on Infosys with an unchanged PT of Rs. 1,730 given strong deal pipeline, its end -to-end capabilities and prowess in digital areas, analytics, automation and Cobalt cloud. We advise investors to adopt a staggered approach to invest into the stock from long term perspective.

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