Buy Infosys; target of Rs 819: Prabhudas Lilladher

Prabhudas Lilladher's research report on Infosys

We attended Infosys analyst meet in Bangalore & came convinced with management long term strategy for driving shareholder returns. Infosys leadership team has done some major changes in last 2 years (investments in digital, large deals engine) which is translating to strong growth momentum & stability in coming years. We believe Infosys strategic investments in sales force, talent & localization are largely behind & management will focus on cost optimization (US$150-200mn savings target). Digital revenues have grown to 38.3% of revenues and have been a strong growth driver for the company. We upgrade Infosys to BUY as it is trading at an attractive valuation of 16.5x Mar-21 earnings multiple which is 30% discount to TCS & also offering a dividend yield of 3.53%.

Outlook

We value Infosys on Sep-21 earnings at 18x multiple & arrive at unchanged target price of Rs.819. INFY is trading at 19.3x/16.6X/15x FY20E/21E/22E earnings at an EPS of Rs.37.2/43.2/47.8 respectively.