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What should investors do with Infosys after Q4 results: buy, sell or hold?

Infosys has reported a 2.3 percent sequential decline in consolidated profit at Rs 5,076 crore for the quarter ended March 2021.

April 15, 2021 / 07:03 PM IST

Infosys share price fell 5 percent in the early trade on April 15, a day after the IT services company reported a 2.3 percent sequential decline in consolidated profit at Rs 5,076 crore for the quarter ended March 2021.

Consolidated revenue from operations grew by 1.5 percent sequentially to Rs 26,311 crore, while consolidated revenue in constant currency grew by 2 percent and the topline growth in dollar terms was at 2.8 percent quarter-on-quarter.

The company's board has approved a buyback of equity shares, through the open market route, amounting to Rs 9,200 crore at a price not exceeding Rs 1,750 a share subject to shareholders' approval.

The board also the board recommended a final dividend of Rs 15 per equity share for the financial year 2021. The record date for the purpose of the payment is June 1, 2021.

Here is what brokerages have to say on the stock and company after Q4 earnings:

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Macquarie | Rating: Outperform | Target: Rs 1,680

The Q4 results had a beat at margin but miss at revenue level, while guidance for FY22 is in line with consensus estimates.

The strong deal closures in FY21 set the stage for robust double-digit growth in FY22, while a healthy mix of buyback and dividend underpin return of 85 percent FCF to shareholders.

Also read: Infosys Q4 and FY21 scorecard : Here are 9 key takeaways

Goldman Sachs | Rating: Buy | Target: Rs 1,699

Any correction would present an even better buying opportunity. Broking house has maintained FY22 constant currency revenue growth at 16.5 percent YoY and margin of 24 percent. It sees the company executing strongly in the current technology up cycle.

CLSA | Rating: Buy | Target: Rs 1,660

The 2 percent constant currency revenue growth may be an optical disappointment, while 4.6 percent QoQ volume growth is a 10-year high for Q4.

The margin defence was effective in Q4 and the guided margin band of 22-24 percent for FY22 was as expected. The company "is our preferred play on growing digital spend and market share gains".

Credit Suisse | Rating: Outperform | Target: Cut to Rs 1,725 from Rs 1,810

It was an unimpressive quarter with FY22 guidance looking conservative. Credit Suisse is positive on the company given the industry-leading growth potential in the medium term. Factoring the FY22 guidance, it has reduced FY22/23 earnings estimates by 5-6 percent.

JPMorgan | Rating: Overweight | Target: Rs 1,700

The Q4 was mixed with a miss on headline revenues, while slight beat on margin and slight miss on EPS.

The FY22 guidance was largely in line with expectations. The stock should be supported by the increase in dividends and buyback. The company is expected to outpace peers in FY22.

Dolat Capital | Rating: Accumulate | Target: Rs 1,520

Given the in-line result and strong revenue growth guidance at 12-14 percent, the growth estimates have been upgraded marginally for FY22/23E by 62bps/14bps. However, given its stern stance on OPM band of 22-24 percent, the profitability estimate for FY22E has been curtailed by 18bps resulting in a 1 percent cut in earnings estimate (street would see steeper cut).

A 2.8 percent sequential growth is expected in USD revenues led by broad-based traction across all verticals. OPM is expected to remain stable for Q1 sequentially.

ICICI Direct | Rating: Buy | Target: Rs 1,650

An improved demand environment, traction in large deals, increase in outsourcing in the US and Europe, vendor consolidation opportunities, captive carve-outs and cost takeout deals are expected to drive revenues in the long term.

In addition, healthy traction in digital revenues, revenue growth outpacing TCS over the past 12 months and margin gap narrowing with TCS are other key positives. This, coupled with healthy cash conversion, robust capital allocation policy and EPS accretive buyback, prompt us to be positive on the stock.

Motilal Oswal

The fourth quarter saw some moderation from the industry-leading growth rates. We believe the company will show top quartile growth performance in FY22E on the back of its strong technical capabilities and the ramp-up in deal wins in FY21.

We expect Infosys to be a key beneficiary of a recovery in IT spends in FY22E. Our relative preference for Infosys over TCS is premised on its headroom for increase growth potential, which was further reinforced by this result.

Prabhudas Lilladher | Rating: Buy | Target: Rs 1,632

We have cut our estimates by 3 percent/1 percent in FY22E/23E as we factor buyback. We value Infy at 27x to arrive at a changed target price of Rs 1,632 (earlier: Rs 1,646) on FY23 EPS of Rs 60.5. Infy is trading at 25.9X/23.1X FY22/23 earnings of Rs 53.8/60.5 on FY22/23E, respectively.

At 0920 hours, Infosys was quoting at Rs 1,339.90, down Rs 58.70, or 4.20 percent, on the BSE.

The share touched its 52-week high of Rs 1,480.00 on April 12, 2021 and a 52-week low of Rs 604.00 on April 16, 2020. It is trading 9.47 percent below its 52-week high and 121.84 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Apr 15, 2021 09:40 am
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