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Maintains the overall growth momentum

Our view

It delivered strong revenue performance with stable margin in a challenging environment . The pickup in attrition remains a challenge. Robust deal booking provides strong revenue visibility. But, it continues to face the margin headwinds as attrition has sharply picked up.  We expect it to report revenue CAGR of 17.5% with average EBIT margin of 19.1% over FY22E‐FY24E. We maintain ADD Rating on the stock with revised target price of Rs 762/share.

Result Highlights

* Reported revenue of    Rs 196.7 bn( up 7.8℅  QoQ in INR terms; IT services sequential growth of 6.9% QoQ in USD terms; with growth in cc terms at 8.1% QoQ. Organic revenue growth was 4.6% QoQ in cc terms. Has guided for 2‐4% QoQ revenue growth in cc terms for Q3FY22.

* EBIT margin was flat QoQ at 17.3℅ in line, even after absorbing the impact of Capco acquisition and also had wage hike for select staff in September.

* Demand environment remained strong for the company as it reported deal wins of $580mn.

* Offshore revenue grew 160 bps QoQ to 55.6%.

* Added net 11,400 employees in quarter to reach 221,365 employees  

* Gross utilization increased by 40 bps QoQ to 78.1% . Employee attrition increased by 500 bps QoQ to 20.5%.

* Total number of active customers grew by 55 QoQ to 1,284.

Valuation

The stock trades at PER of 23.2x on FY24E EPS. Robust deal booking and growing share of digital revenue provides strong visibility about revenue growth. Positive operating leverage and the efficiency measures should help to broadly maintain stable margin. We rollover to FY24E estimates and value the stock at 25x(10% discount to Infosys Target multiple) on FY24E earnings, arriving at target price of Rs 762/share.

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