Buy Infosys Ltd For Target Rs.1670 - ICICI Direct
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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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