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Looking for minimum 15% CC growth in FY23

About the stock: Infosys Ltd (Infy) is one of the leading IT players catering to BFSI, retail, communication, manufacturing & hi tech verticals.

* The company generates >58% of revenues from digital technologies

* Dividend payout (>80%), margins (>20%) and RoCE (>31%) key positives

Q2FY23 Results: Infosys reported strong revenues for Q2FY23.

* US$ revenues grew 2.5% QoQ to $4,555 million, up 4% QoQ in CC terms

* EBIT margins were up 150 bps QoQ to 21.5%

* Large deal TCV of US$2.7 billion (bn), up 58.8% QoQ & 25.6% YoY

What should investors do: Infy’s share price has grown by ~3.1x over the past five years (from ~| 464 in October 2017 to ~| 1,420 levels in October 2022).

* We maintain BUY rating on the stock

Target Price and Valuation: We value Infosys at | 1,670 i.e. 23x P/E on FY25E EPS.

Key triggers for future price performance:

* Differentiated digital and cloud capabilities to drive growth

* Growth remained broad-based and deal momentum robust, with digital transformation rapidly scaling across verticals and regions

* Infosys to post industry leading revenue growth (13.2% CAGR in FY22-25E) ? Double-digit return ratios, strong cash generation and healthy payout

Alternate Stock Idea: Besides Infosys, in our IT coverage we also like TCS.

* Strong organic growth, consistent financials, industry leading margins and healthy capital allocation policy prompt us to be positive on the stock

* BUY with a target price of | 3,630

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SEBI Registration number is INZ000183631

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