Buy Infosys; target of Rs 1848: YES Securities

YES Securities' research report on Infosys

Overall, it reported mixed financial performance for the quarter as revenue was inline with estimates; but the EBIT margin was below estimates, on supply side pressure and higher Sales and Marketing costs The outlook remains strong led by robust demand environment and that is also reflected in increased revenue growth guidance of 14‐ 16% in cc terms for FY23. Deal pipeline remains strong and that provides strong revenue visibility. It continues to invest in scaling up its cloud offerings and automation tools to capitalize on the demand environment. Certain cost related to travel and admin are expected to come back but with improving employee pyramid and moderation in employee attrition, it is expected to report sequential improvement in margin over next 3 quarters. Hybrid model of work should help to optimize admin costs. We estimate revenue CAGR of 15.3% over FY22‐24E with average EBIT margin of 22.7%.

Outlook

We maintain BUY rating on the stock with revised target price of Rs 1,848 at 25x on FY24E EPS. We have cut down our target valuation PE multiple from 27.5x to 25.0x to account for higher cost of capital(WACC) in this environment of high macroeconomic uncertainty. Trades at PER 20.4x on FY24E EPS.