Buy Infosys; target of Rs 1630: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Infosys

INFO reported an in line 2QFY23 revenue of USD4.55b, up 4% QoQ in CC terms. It announced a large deal TCV of USD2.7b (up 59% QoQ, net new at 54%), which was its highest in the last seven quarters and was aided by a strong pickup in cost optimization-related work. The management sees traction in the large deal pipeline, despite an adverse demand environment. The management said it is seeing weakness in parts of Retail, Hi-Tech, Financials (Mortgages), and Telecom as it has started seeing some deal-related slowdowns in these segments. Despite this, it updated its revenue growth guidance for FY23 to 15-16% YoY in CC terms (from 14-16% earlier). It also highlighted its ability to secure Digital and cost savings-related work. EBIT margin grew 150bp QoQ at 21.5% in 2QFY23, above our estimate of 20.2%, on cost optimization, depreciation in the INR v/s the USD, and lower sub-contractor expenses. The management narrowed its margin guidance to 21-22% from 21-23% earlier. We view the lower end as achievable. We were positively surprised by INFO's margin performance, as that was the key concern among investors, given the supply-related headwinds. While INFO has done exceptionally well in lowering sub-contractor cost, we see scope for further improvement in FY24. While the management highlighting of some verticals as slow moving is a cause for concern, the large deal TCV in 2QFY23 should provide some buffer from any impact on revenue. INFO's 2HFY23 guidance implies weak growth over the next two quarters, which was within our expected range and should not alter the business opportunity. We factor in 9.6% revenue CAGR over FY22-24, despite cross-currency headwinds. We factor in a margin of 21.1%/21.3% in FY23/FY24, leading to 11% PAT CAGR over FY22-24. We have kept our FY23/FY24 EPS estimate broadly flat after the 2QFY23 result and view INFO as a beneficiary of an acceleration in IT spends, given its capabilities around Cloud and Digital transformation. We value the stock at 25x FY24E EPS and reiterate our Buy rating.

Outlook

We expect INFO to be a key beneficiary of an acceleration in IT spends. Based on our revised estimates, the stock is currently trading at 22x FY24E EPS. We value the stock at 25x FY24E EPS, implying a TP of INR1,630.

More Info

At 17:30 Infosys was quoting at Rs 1,474.05, up Rs 54.30, or 3.82 percent.

It has touched an intraday high of Rs 1,494.00 and an intraday low of Rs 1,468.00.

It was trading with volumes of 519,749 shares, compared to its thirty day average of shares, a decrease of percent.

In the previous trading session, the share closed down 0.64 percent or Rs 9.10 at Rs 1,419.75.

The share touched its 52-week high Rs 1,953.70 and 52-week low Rs 1,355.50 on 17 January, 2022 and 26 September, 2022, respectively.

Currently, it is trading 24.55 percent below its 52-week high and 8.75 percent above its 52-week low.

Market capitalisation stands at Rs 620,254.82 crore.For all recommendations report, click here

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Infosys - 141022 - moti