KR Choksey's research report on Infosys
Infosys Limited (INFO) Q2FY23 performance was slightly lower than our estimate. Dollar Revenue grew by 2.5%/13.9% in QoQ/YoY to USD 4,555mn (KRChoksey est. USD 4,578mn), driven by Manufacturing, financial services and Life science. Rupee revenue grew by +6% QoQ to INR 3,65,380Mn (KRChoksey est. INR 3,65,370Mn). 61.8% of revenue came from Digital business, growing at +31% YoY CC (although sequential deceleration), including Q2 cloud revenue at USD +1bn. Reported operating margin expanded by ~150bps to 21.5% QoQ, supported by +70bps from FX, +130bps on contract profitability and efficiencies (lower sub-con) and -40bps from senior workforce wage increase. Reported Net profit grew by ~12.3% QoQ to INR 60,210mn (KRChoksey est. INR 59,280mn) with margin of 16.5%. Though management hasn’t clarified about FY24 but we believe that there will be some selective discretionary spending cut leads to lower volume & some price compression. Company’s revenue guidance for FY23 stood at 15-16% cc (than 14-16% consensus) & operating margin guidance stood at 21%-22% (Earlier margin guidance 21%-23%) . Our target price of INR 1,805 is based on 25x Mar-24E EPS with EPS CAGR of ~17.2% over FY22-24E.
Outlook
Infosys is currently trading at a valuation with a P/E multiple of 24.7x/19.6x on FY23E/FY24E earnings. Despite more verticals are turning cautious and point towards an expected slowdown in 2HFY23, Infosys’ strength in managing the twin journeys of digital transformation and cost takeout will drive growth leadership and we are assigning a P/E multiple of 25x to the FY24 estimated EPS of INR 72.2 to arrive at a target price of INR 1,805 per share, an upside of ~27% over the CMP. We maintain our rating to “BUY” rating to the stock.
More Info
At 13:36 hrs Infosys was quoting at Rs 1,485.30, up Rs 65.55, or 4.62 percent.
It has touched an intraday high of Rs 1,494.00 and an intraday low of Rs 1,468.00.
It was trading with volumes of 442,273 shares, compared to its thirty day average of 578,346 shares, a decrease of -23.53 percent.
In the previous trading session, the share closed down 0.64 percent or Rs 9.10 at Rs 1,419.75.
The share touched its 52-week high Rs 1,953.70 and 52-week low Rs 1,355.50 on 17 January, 2022 and 26 September, 2022, respectively.
Currently, it is trading 23.98 percent below its 52-week high and 9.58 percent above its 52-week low.
Market capitalisation stands at Rs 624,988.62 crore.
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