Reduce Infosys; Rs 1,300 is the target: Sharekhan

Infosys reported sales of $4617 million, an increase of 1% quarter over quarter and 4.2% year over year in CC. This figure is in line with our projections of $4613 million. The Manufacturing, High Technology, and Energy verticals were the primary drivers of sequential increase. The EBIT margins experienced a decline of 20 basis points quarter-on-quarter, landing at 20.8% as predicted. Large transaction TCV wins amounted to $2.3 billion, reflecting an increase of 11% quarter over quarter and 35% year over year. After providing prior forecast of 4-7% for constant currency revenue for FY24, management significantly reduced that guidance to be between 1-3.5%. Despite this, the management has decided to keep the operating margin forecast for FY24 at 20-22%.

Outlook

It is anticipated that Infosys will underperform industry peers like TCS and HCL Tech, which has led to a reduction in target projections. Infosys has a history of disappointing investors by providing significantly reduced revenue guidance for the current fiscal year (FY24). As a result, we are now recommending that investors SELL the stock rather than HOLD it, and we have lowered our price target for the stock to Rs. 1300. The company is currently trading at 25.3x/23.5x the estimated EPS for the fiscal year 24/25 in its CMP.

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Infosys - 21 -07 - 2023