After hitting 52-week high and gaining 4 percent in the early trade Infosys share price fell 3 percent intraday on October 14, a day after the company declared its September quarter earnings.
The company reported a 14.4 percent sequential growth in consolidated profit at Rs 4,845 crore for the September quarter and revised its full-year revenue as well as margin guidance given the highest ever deal wins in Q2.
Consolidated revenue from operations increased to Rs 24,570 crore in Q2 FY21, up by 3.8 percent QoQ, while dollar revenue grew by 6.1 percent sequentially to $3,312 million for the September quarter, with constant currency revenue growth of 4 percent.
Also Read - Infosys Q2 beats estimates with 14.4% profit growth; company raises full year revenue, margin guidance
Infosys has revised its revenue growth guidance upward to 2-3 percent in constant currency for the financial year 2020-21, from 0-2 percent earlier. The full-year operating margin guidance was also revised upward to 23-24 percent against 21-23 percent earlier.
The company board declared an interim dividend of Rs 12 per equity share and fixed October 26, 2020 as record date for interim dividend and November 11, 2020 as payment date.
Here is what broking houses have to say about the stock after the earnings announcement:
Dolat Capital says accumulate
Factoring strong performance, robust TCV wins, confident commentary and upgrade in guidance/outlook, broking house upgraded its growth estimates by 1.25% in FY21/22E and assigned accumulate view on stock with a target price of Rs 1,270 (24x on FY23E EPS).
Motilal Oswal reiteates buy
The company’s performance during the quarter indicates that some of the investments made in the previous years toward re-skilling, re-energizing the salesforce, etc., are now paying off.
Motilal Oswal expects Infosys to be a key beneficiary in terms of recovery in IT spends in FY22.
As Infosys has outperformed TCS in 1HFY21 and is on its way to an industry-leading performance in FY21 (amongst Tier I), the broking firm expects the divergence in the valuation to narrow (to 10%). On its revised estimates, the stock is currently trading at 21x FY22 EPS. It values the stock at 25x FY22E EPS (10% discount to TCS).
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Prabhudas Lilladher reiteates buy
Infosys' deal pipeline remains strong with clients focusing on accelerated digital transformation, cloud deployment, SaaS and automation projects to improve cost efficiencies.
The stock stays top pick in the sector as it benefits from near term margin defense and long term growth acceleration from DX/cloud/AI megatrends.
Broking house value Infy at 27x to arrive at a changed target price of Rs 1436 (earlier: Rs 1259) on Sep-22 EPS of Rs 53.2. Infy is currently trading at 22.3X/20.4X FY22/23 earnings of Rs 51/55.6 on FY22/23E respectively.
Jefferies | Rating: Buy | Target: Raised to Rs 1,380 from Rs 1,140
The Q2 results surprised positively with revenues up 4% QoQ. Research house raised its FY21-23 estimates by 2-7%. The new guidance reflects higher confidence in stronger growth, reported CNBC-TV18.
Goldman Sachs | Rating: Buy | Target: Rs 1,369
The company reported another strong beat for a second consecutive quarter, driven by both stronger revenue growth & EBIT margin.
Goldman Sachs raised FY21-23 EPS estimates by up to 4%, reported CNBC-TV18.
CLSA | Rating: Buy | Target: Raised to Rs 1,330 from Rs 1,180
The company has the best-in-class execution & a generous capital allocation policy. A well-balanced articulation underlines its position as the best play on the theme.
Research house FY22/FY23 EPS estimates are higher by 6% each and should see an incremental shrinking of the valuation gap versus TCS. The revenue/deal win momentum should help the company end FY21 at the upper end of guidance.
The gains from potential vendor consolidation could be incremental and expects the margin to come down from Q2 peak as the costs rebound, reported CNBC-TV18.
At 12:06 hrs Infosys was quoting at Rs 1,115.60, down Rs 21.40, or 1.88 percent on the BSE.
