Buy Infosys; target of Rs 2150: Emkay Global Financial

Emkay Global Financial's research report on Infosys

Infosys reported better than expected revenue growth in Q3. Revenue grew 1.7% QoQ CC, partly aided by increase in pass-through revenue and incremental contribution (20bps) from the in-tech acquisition. EBITM expanded by 20bps to 21.3%, in line with expectation. Deal-win (worth USD2.5bn) was steady, with net new deals TCV up 57% QoQ. Deal pipeline has also improved, with the large-deal pipeline becoming stronger. Q3 saw improvement in the discretionary spending environment in the Retail and CPG in North America, and BFSI in Europe; this follows improvement in BFSI in North America in Q2. Demand is stable in other industries, with cost optimization driving the spends. It has upped FY25 revenue growth guidance for the 3rd consecutive quarter to 4.5-5% (3.75-4.5% earlier).

Outlook

However, this implies sequential decline of 2.5% to 0.6% in Q4, negatively impacted by seasonality of pass-through revenue and lesser working days. We tweak FY25-27E EPS by less than 1%, factoring in the Q3 performance. We retain BUY and TP of Rs 2,150 at 28x Dec-26E EPS.