Buy Infosys; target of Rs 1770: 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 broad based growth of 4.8% QoQ CC, beating our estimate of 3.9%. Deal TCV stood at USD2.6b, implying a growth of 48% YoY. While net new deal wins were relatively lower at 30%, the deal pipeline remains strong given the robust demand environment. EBIT margin fell 80bp QoQ to 23.7% in 1QFY22 (est. 24.8%), due to a 50bp/80bp impact from higher subcontracting expenses (highest in the last five years)/employee cost (on retention/hiring and promotions). This was partially offset by a 40bp/10bp impact from utilization/currency. Utilizations and offshore mix remain stretched, indicating a strong demand environment. The management increased its FY22 USD revenue growth guidance to 14-16% CC YoY from 12-14%. It characterized the current demand environment to be one of the strongest in a while. We expect INFO to deliver another year of an ongoing guidance raise as the current one does not fully factor in strong technology demand and execution of its record high deal wins (LTM deal wins rose 86% YoY to USD14.9b).

Outlook

As INFO has outperformed TCS in FY21 and in 1QFY22, we expect no valuation divergence between the two companies. Based on our revised estimates, the stock is currently trading at 24x FY23E EPS. We value the stock at 27x FY23E EPS, implying a TP of INR1,770.

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