Hold Infosys; target of Rs 1500: Sharekhan

Sharekhan's research report on Infosys

Infosys delivered a surprisingly weak Q4, with 3.2% q-o-q decline in CC revenue missing estimates on account of unplanned project ramp downs and owing to one-time revenue impact due to cancellations and specific client issues. EBIT margin contracted by 47 bps q-o-q to 21% missing our estimates of 21.3% as well as street estimates. TCV wins at $ 2.1 bn or the quarter was weak down 36% q-o-q and 7% y-o-y. The management expressed weakness in telecom, Hi-tech Retail and certain financials among factors leading to uncertainty and delays in decision making. Quarterly ask rate 1.7-2.8% for FY24 cc revenue guidance of 4-7%, appears steep given tough near term macro environment.

Outlook

Given the weak quarterly numbers and uncertain macro backdrop, expect the stock to underperform in the near term. We expect muted 3.7%/5.4% Sales and PAT CAGR respectively over FY23-25E Hence, we downgrade the stock to hold with a revised price target of Rs. 1500. At the CMP the stock trades at 23.4x its FY2024E EPS and 21.7x its FY2025E EPS.