KR Choksey's research report on Infosys
Infosys Limited (INFO) Q3FY23 performance was slightly lower than our estimate. Dollar Revenue grew by 2.4%/13.7% in QoQ/YoY to USD 4,659mn (KRChoksey est. USD 4,703mn), driven by double digit growth in all business segments, excepts BFSI, Lifesciences and others. Rupee revenue grew by +4.9% QoQ to INR 3,83,180Mn (KRChoksey est. INR 3,83,180Mn) in line with our estimate. 62.9% of revenue came from Digital business, growing at +21.7% YoY CC (although lowest since the company started providing this data). Reported operating margin was flattish QoQ at 21.5%, improvement in margin by +40bps from FX, +70bps on contract optimization (lower sub-contractors cost), were offset by -40bps on higher SG&A costs and ~80bps on headwind from furloughs and third party items for service delivery. Reported Net profit grew by ~9.4% QoQ and 13.4% YoY to INR 65,860mn (KRChoksey est. INR 65,117mn) with margin of 17.2% (KRChoksey est. 17%). The management of the company has changed revenue guidance to 16-16.5% for FY23 cc (earlier guidance of 15-16%) on the back of robust deal signing in Q3FY23; whereas maintained its operating margin guidance of 21%-22% . Our target price of INR 1,805 is based on 25x Mar-24E EPS with EPS CAGR of ~17.2% over FY22-24E.
Outlook
Moreover, Infosys’ strength in managing the twin journeys of digital transformation and cost takeout will drive growth leadership and we are assigning a P/E multiple of 25x to the FY24 estimated EPS of INR 72.2 to arrive at a target price of INR 1,805 per share, an upside of ~20% over the CMP. We maintain our rating to “BUY” rating to the stock.
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