Buy Infosys; target of Rs 1760: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Infosys

INFO reported strong 3QFY23 revenue of USD4.66b, up 2.4% QoQ in CC terms, ahead of our estimate of 1.5% QoQ CC. It posted a strong large deal TCV of USD3.3b (up 22% QoQ, net new at 36%), the largest ever since 3QFY21. Management sees strong traction in the large deal pipeline, despite an adverse demand environment. The weakness is clearly visible in parts of Retail, Hi-Tech, Financials (Mortgages and IB), and Telecom. Despite the weakness, INFO raised its FY23 revenue growth guidance to 16.0-16.5% YoY in CC terms from 15-16% earlier, implying a limited impact from macro headwinds next quarter. EBIT margin was flat QoQ at 21.5% in 3QFY23, in line with our estimate. Easing supply, a 6% drop in quarterly annualized attrition, utilization buffer, and fresher deployment should help INFO to deliver 21.2% margin in FY23, in line with the lower end of its EBIT margin guidance of 21-22%. We are positively surprised by a TCV of USD3.3b, the second highest in its history and up 20% QoQ despite pressure on end-demand. Strong vendor consolidation deals and cost optimization projects continue to help INFO to gain market share. LTM large deal TCV of ~USD10b and guidance upgrade should more than adequately cushion the near-term headwind from weak macro and assuage growth concerns. Strong traction in vendor consolidation and cost takeout deals should help INFO to deliver an ~11% revenue CAGR over FY22-25, despite macro headwinds in H1FY24. We factor in a margin of 21.2%/21.5%/22.0% in FY23E/FY24E/FY25E, leading to a 13.5% PAT CAGR over FY22-25E.

Outlook

We expect INFO to be a key beneficiary of acceleration in IT spends. Based on our revised estimates, the stock is currently trading at 22x FY24E EPS. We value the stock at 26x FY24E EPS, implying a TP of INR1,760.

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Infosys - 13 -01-2023 - moti