Should you buy Infosys stock post-Q1 results?

• Follow

IT major Infosys on July 14 reported 22.70% year-on-year growth in consolidated net profit at Rs 5,195 crore for the quarter ended June 30. It had posted a profit of Rs 4,233 crore in the same period last year. On the other hand, the figure increased by 2.30% on a quarter-on-quarter basis. Consolidated revenue of the company increased by 17.90% YoY and 6% QoQ to Rs 27,896 crore. The operating profit of Infosys advanced by 23.10% YoY to Rs 6603 crore during the quarter under review.

The company revised its revenue guidance for FY22 to 14%-16% and retained its margin guidance at 22%-24%.

Here’s a look at what analysts have to say:

CLSA | Rating: Buy | Price target: Rs 1,900

Expected upgrade in FY22 revenue growth guidance indicates strength of demand drivers. While we cut FY22 EPS by 2%, FY23/24 EPS estimates remain broadly unchanged. The company remains preferred play on growing digital spending and market share gains. It is also part of our India’s focus buy list.

Sharekhan | Rating: Buy | Price target: Rs 1,820

A healthy deal pipeline and strong demand environment across verticals. Acceleration in technology spending on the back of higher digital and cloud adoption increased outsourcing and legacy modernization. The management remains optimistic that its earlier investments in digital capabilities would help it capture opportunities in clients’ growth and transformation initiatives.

Sharekhan expects Infosys to be in the top quartile of growth in the medium term, led by strong deal wins, solid execution, better account mining, and stability in management ranks. Infosys to report USD revenue and earnings growth of 16.3% and 16%, respectively, over FY2021-FY2023E. The stock is currently trades at 26x/23x its FY2023E/FY2024E EPS (earnings per share). Continue to prefer Infosys given its robust execution capabilities, strong balance sheet and healthy FCF (free cash flow) generation capability.

Prabhudas Lilladher | Rating: Buy | Price target: Rs 1,832

The brokerage firm believes flex of margin levers (increase in offshore mix, pyramid optimization, focus on high margin digital business) will not completely offset cost increase but will ensure that margins are comfortably above pre-Covid levels (~22%).

Value Infy at 28x to arrive at a changed target price of INR 1832 now on Sep23 EPS of Rs. 65.4. Infy is currently trading at 29.9X/25.8X earnings of Rs 52.7/61.1 for FY22/23E respectively with revenue CAGR (Compounded Annual Growth Rate) of 14.8% and EPS CAGR of 15.4% over FY21-23E. We have introduced FY24 estimates to capture sustainable strong demand into our numbers and valuations.

Motilal Oswal| Rating: Buy | Price target: Rs 1,770

Infosys deliver another year of an ongoing guidance raise as the current one does not fully factor in strong technology demand and execution of its record high deal wins. It continues to view Infosys as a key beneficiary of a recovery in IT spends in FY22, given its capabilities around Cloud and Digital transformation and value it at 27x FY23E EPS.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)