KR Choksey has given Buy recommendation for Infosys with a target price of Rs. 2094 in its research report issued on Apr 16, 2022

KR Choksey’s research report on Infosys

Dollar Revenue was up 2.6% QoQ to USD 6,696mn (KRChoksey est. USD6,681mn). Rupee revenue grew by 3.5% QoQ to INR 5,05,910mn (KRChoksey est. INR 5,02,487Mn). Reported operating margin contracted by 7bps to 25.0% led by supply side pressures of backfilling of attrition, increased sub-contracting costs, wage interventions to retain talent and discretionary costs. Reported Net profit grew by 1.6% QoQ to INR 99,260mn (KRChoksey est. INR 99,889mn) with margin of 19.6%. In this quarter, TCS has registered a highest ever deal bookings of USD 11.3bn (two mega deal wins >USD 1Bn in Q4). TCS is well poised to benefit from strong demand and growing digital transformation opportunities, although salary inflation and potential slowdown in Europe remain near-term concerns. As supply side pressures ease off in FY23, there is scope for margin expansion led by reducing sub-contracting costs, improved pricing, pyramid optimization, best-in-class supply side engine and leverage from growth. The company declared a dividend of INR 22 per share. Our target price of INR 4,256 is based on 31.3x Mar-24E EPS with EPS CAGR of 14.6% over FY22-24E.

Outlook

Infosys is currently trading at a valuation with a P/E multiple of 30.5x/24.2x on FY23E/FY24E earnings. Overall Indian technology companies are fully priced-in & remains volatile/range bound due to limited downside risk which is cushioned by sustainable strong growth and the valuation has already peaked out which also limits upside potential. Factoring upgrade in revenue guidance (lower exit quarter base effect), additional traction in BFSI segment, cyber security and confident commentary, we are assigning a P/E multiple of 29x to the FY24 estimated EPS of INR 72.2 to arrive at a target price of INR 2,094 per share, an upside of 19.7% over the CMP. We upgrade our rating to “BUY” from “ACCUMULATE” rating to the stock.

More Info

At 17:30 Infosys was quoting at Rs 1,748.65, up Rs 7.20, or 0.41 percent.

It has touched an intraday high of Rs 1,759.45 and an intraday low of Rs 1,732.25.

It was trading with volumes of 201,207 shares, compared to its thirty day average of 359,607 shares, a decrease of -44.05 percent.

In the previous trading session, the share closed down 1.43 percent or Rs 25.20 at Rs 1,741.45.

The share touched its 52-week high Rs 1,953.70 and 52-week low Rs 1,311.80 on 17 January, 2022 and 14 May, 2021, respectively.

Currently, it is trading 10.5 percent below its 52-week high and 33.3 percent above its 52-week low.

Market capitalisation stands at Rs 735,611.35 crore.

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