Infosys turns 4th largest firm by m-cap after Q2 show. What brokerages say

With a market cap of Rs 6.25 lakh crore, the IT major has once again taken the No.4 spot after RIL, TCS and HDFC Bank by replacing FMCG giant HUL in the list of largest listed companies in India.

After Infosys reported a 23.4% YoY jump in consolidated revenue for the quarter ended September to Rs 36,538 crore, global brokerage CLSA has increased the target price on the stock to Rs 1,800 per share, signalling an upside potential of over 28% from day’s high at Rs 1,490.

Citing strong deal wins, easing supply pressure and attractive buyback, Infosys remains CLSA’s top pick in the sector.

BofA has, however, maintained a neutral rating on the stock with a target price of Rs 1,535.

Kotak Institutional Equities has raised its FY2023-25E EPS by 1-3% on the back of change in currency forecast. With an unchanged target multiple of 25X, the brokerage has increased Infosys’ fair value to Rs 1,750.

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“We largely retain the FY2023-25E revenue growth forecast. Our USD revenue estimates decline due to cross-currency headwinds. We believe there are enough levers to expand margins over the next two years and retain our margin forecasts. We bake in revised INR/USD forecasts resulting in 1-3% upgrade in our EPS forecasts,” Kotak said.

While announcing its September quarter results, the Bengaluru-based software exporter raised revenue growth guidance to 15-16% from 14-16% earlier.

Its EBIT margin increased 150 bps QoQ to 21.5% due to rupee depreciation, lower subcontracting charges, large deal optimization and other operational levers.

“We were positively surprised by Infosys’ margin performance, as that was the key concern among investors, given the supply-related headwinds. While Infosys has done exceptionally well in lowering subcontractor costs, we see scope for further improvement in FY24,” Motilal Oswal said. With a buy rating, the brokerage has a target price of Rs 1,630 on the stock.

For Nomura, the Q2 report card was a mixed bag as the 4% QoQ revenue growth in CC terms missed consensus estimate of 4.5% but Infosys remains its top pick among all largecap IT stocks.

“We expect Infy’s growth outperformance over TCS to continue in FY23-24F,” it said while modestly changing FY23-24F EPS by 0-2% to factor in slightly better EBIT margin.

Sharekhan has maintained its buy rating on Infosys with an unchanged target price of Rs 1,730, given strong deal momentum and the management’s optimism on its capabilities and preparedness to address diverse clients’ needs of transformation as well as on cost optimisation.

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