Infosys Among Sensex Top Winners, Jumps 4% After Quarterly Results; should you buy, sell or hold?

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Infosys announced an interim dividend of Rs 15 per share. (Photo: REUTERS)

The Infosys share price climbed 4% Thursday morning to become the first Sensex winner as investors reacted to the quarterly results released by the company. The second-largest IT services company said its consolidated net profit increased 11.9% year-on-year in the July-September quarter to Rs.5,421 crore. Infosys reported a 20.5% increase in revenue to Rs 29,602 crore in the quarter under review from Rs 24,570 crore in the previous year period, while announcing an interim dividend of Rs 15 per share. The Infosys share price has climbed 37.6% so far this year, now standing at Rs 1,785 per share.

“Our exceptional performance and strong growth prospects continue to demonstrate our strategic direction and the strength of our digital offerings,” said Salil Parekh, CEO and CEO of Infosys. He added that given the continuing momentum, Infosys has further upped its revenue growth forecast to 16.5% -17.5%. The margin indication was maintained at 22% -24%.

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Should we buy or sell?

Kotak Securities – Buy

Fair value – Rs 2,000

Kotak Securities analysts believe Infosys is a “prince among its peers” after the company’s overall performance. The brokerage firm increased the revenue estimates for Infosys and slightly increased the BPA estimates. “We expect good double-digit sales for the next three years. We increase the fair value to Rs 2,000, valuing the company at ~ 30X the EPS of September 2023E. Infosys is well equipped for industry-leading growth over the medium term. Infosys will be at the forefront of – (1) core transformation agreements and (2) digital customer journey management, ”they added. The fair value set by Kotak Securities implies an increase of 12%.

Emkay Global – Buy

Price target – Rs 1,910

Emkay Global said they appreciate the widespread revenue growth, the upward revision of revenue growth forecast for fiscal 22, the number of healthy deals and the resilient margins of Infosys. The IT major managed to sign 22 significant contracts during the quarter, indicating that the contract pipeline remains healthy, with a good mix of new and renewal contracts providing good visibility into revenue, said Emkay Global. “We are increasing the earnings estimates by 0.4% / 0.6% / 0.4% for FY22 / FY23 / FY24, taking into account second quarter performance. We are maintaining Buy with a TP of Rs1.910 at 28x Sep’23E EPS, given the strong earnings momentum and robust demand environment, ”they said.

Yes Titles – Buy

Target price – Rs 2,026

Infosys ‘revenues and EBIT margins in the quarter under review exceeded Yes Securities’ estimates. Analysts believe the feal reserve remains strong and will support growth momentum. “There are headwinds on short-term margins as employee attrition has accelerated sharply. We expect it to post a CAGR of 14.9% with an average EBIT margin of 24.7% during FY22-FY24. We are maintaining BUY Rating in the stock with a revised target price of Rs 2026 ”, they added.

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