Buy Infosys; target of Rs 1850: Sharekhan

Sharekhan's research report on Infosys

Revenues stood at $4,663 million, down 1% q-o-q in constant currency CC terms, beating our estimates of $4,625 million in a seasonally soft quarter. EBIT margin declined ~70 bps q-o-q to 20.5% in- line with our expectations of 20.3%. EBIT margin during the quarter was impacted by wage hike and McCamish cyber-attack incident but partially offset by cost optimization efforts. Large deal TCV stood at $3.2 billion, with 71% being net new deals. Deal win momentum remains strong with TTM TCVs up ~53% y-o-y. The management has tightened the revenue growth guidance for FY24 to 1.5-2% in CC terms from 1-2.5% implying muted revenue growth for Q4FY24 but has maintained the operating margin guidance for FY24 at 20% to 22%.

Outlook

Large deal signings and continuity of renewals to gain further traction as macro headwinds recede, improving earning visibility for FY25/FY26E. Hence, we maintain a Buy on Infosys with revised PT of Rs. 1850 (increase in PT reflects the roll forward to FY26E EPS) At the CMP, the stock trades at 23.3x/20x its FY25/26E EPS.

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