Motilal Oswal has given Buy recommendation for Infosys recommended buy rating on the stock with a target price of Rs 2000 in its research with a target price of Rs. 2000 in its research report issued on Apr 13, 2022

Motilal Oswal’s research report on Infosys

INFO reported a weak growth of 1.2% QoQ CC, below our estimate of 2.8%, on account of seasonality, the impact from the COVID-19 pandemic, and client provisions. Large deal TCV of USD2.3b was a tad soft (net new at 48%). However, the management indicated good traction in its large deal pipeline and reiterated that the demand remains strong. EBIT margin dipped 190bp QoQ to 21.6%, below our estimate of 23%, due to lesser days, lower utilization, and higher visa costs. The management guided at a margin of 21-23% for FY23 (100bp cut from its earlier guidance in FY22). It guided at a revenue growth of 13-15% for FY23. We see scope for an upward revision in coming quarters as evident from past trends. Strong headcount addition at 22k, a robust demand environment, and a robust revenue guidance for FY23 points towards continued strong revenue growth for FY23. We factor in 16% revenue CAGR over FY22-24. We factor in a margin of 22.4/23% in FY23/FY24. Though attrition in LTM jumped 220bp to 27.7%, the management said it has fallen by 5% on a quarterly annualized basis. Utilization remains high, but should trend lower going forward. INFO reported a strong FCF/PAT conversion of 101% in 4QFY22. FCF was largely flat YoY in 4QFY22. We have lowered our FY23/FY24 EPS estimate by 5% on slower growth and margin pressure. We view INFO as a key beneficiary of an acceleration in IT spends, given its capabilities around Cloud and Digital transformation. We value the stock at 28x 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 25x FY24 EPS. We value the stock at 28x FY24E EPS, implying a TP of INR2,000.

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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