Hold Infosys Ltd For Target Rs.2,000 - ICICI Direct
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Weak Q4; strong revenue guidance for 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
Q4FY22 Results: Infosys reported weak Q4 numbers.
US$ revenues grew 0.7% QoQ to $4,280 million, up 1.2% QoQ in CC terms
EBIT margins were down 190 bps QoQ to 21.6%
The company declared a dividend of | 31 per share for FY22
What should investors do? Infy’s share price has grown by ~4.3x over the past five years (from ~| 402 in April 2017 to ~| 1,748 levels in April 2022).
We revise our rating on the stock from BUY to HOLD
Target Price and Valuation: We value Infosys at | 2,000 i.e. 28x P/E on FY24E 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 (13.4% CAGR in FY22-24E)
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
HOLD with a target price of | 4,120
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