Prabhudas Lilladher has given Accumulate recommendation for Infosys with a target price of Rs. 1899 in its research report issued on Apr 14, 2022

Prabhudas Lilladher’s research report on Infosys

We cut Infy’s rating to Accumulate from Buy and DCF based target price to Rs. 1899 (earlier: Rs.2204) as we cut EPS estimates by 10.6%/8.2% for FY23/24E led by ~100-130bps cut in EBIT margins, lower than expected exit revenue growth rate, and increase in risk free rate to 7.2% (earlier: 6.8%). EBIT margin guidance of 21-23% for FY23 vs cons expectations of 22-24% came as negative surprise as it is below pre-covid levels (23%+ over FY17-19). Strong revenue guidance of 13-15% YoY CC for FY23 (vs cons expectations of 12-14%) despite low TTM TCV of $9.5 bn (vs $14.1 bn last year) led by largest ever large deal pipeline, strong client metrics and net new wins (40% in FY22) indicate Infy’s ability to capitalize strong demand environment. We have already baked in 13.8% YoY USD growth for FY23, however negative surprise in margins can be a drag on FY23 EPS. Infy has already reported weak exit EBIT margins of 21.6% in Q4 (-200bps QoQ). Lower than expected EBIT margin guidance of 21-23% for FY23 factors in headwinds from supply side cost pressures, return of travel and facility costs, investments in building deeper digital capabilities and potential drop in utilization levels.

Outlook

We assign DCF based TP of INR 1899 (earlier: 2204) with implied target multiple of 28x on FY24 EPS (earlier: 30x). Infy is currently trading at 30x/26x on earnings of INR 57.8/68.4 for FY23/24E respectively with revenue CAGR of 12.6% and EPS CAGR of 14.1% over FY22-24E.

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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