Buy Infosys Ltd For Target Rs.1,838 - Yes Securities
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Broadly inline performance; Revenue guidance for FY24 lowered to 1 to 2.5% on demand concerns
Result Synopsis
Infosys (INFO) reported broadly inline performance for the quarter. The revenue growth was above estimates; while EBIT margin was inline with expectation. It reported increase in revenue by 2.3% QoQ in cc terms. Revenue grew by 2.2% QoQ in USD terms (up 2.8% QoQ in INR terms). EBIT margin improved by 42 bps QoQ to 21.2% on lower SG&A cost in the quarter.
The near term demand environment remains challenging as clients remain cautious regarding the evolving macroeconomic situation in the US and Europe and there has been slowdown in discretionary tech spending in sectors such as Hitech, Retail, Telecom, etc. and it continues to impact near term revenue performance. Management has lowered FY24E revenue growth guidance to 1 to 2.5% in cc terms from earlier guidance of 1 to 3.5% on account of near term demand concerns. Employee attrition continues to decline and should support operating margin going ahead. We estimate revenue CAGR of 10.3% over FY23?25E with average EBIT margin of 21.9%. We maintain our BUY rating on the stock with revised target price of Rs 1,838/share at 25.5x on FY25E EPS. The stock trades at PER of 24.4x/20.3x on FY24E/FY25E EPS.
Result Highlights
* Reported revenue of Rs 389.9bn (up 2.8% QoQ in INR terms, up 2.2% QoQ in USD terms) led by growth in Manufacturing, Retail, Hitech and Other verticals. The revenue increased by 2.3% QoQ in cc terms. In terms of verticals, the YoY growth was led by Manufacturing (up 12.6% YoY in cc terms) and Retail (up 9.2% YoY in cc terms).
* EBIT margin improved by 42 bps QoQ to 21.2%, led by decrease in Selling and Marketing Expenses (down 1.6% QoQ) during the quarter.
* Reported Large deal wins of $7.7bn vs $2.3bn in Q1FY24.
* Gross client addition was 100 vs 99 in Q1FY24. Days sales outstanding increased to 67 days vs 63 in Q1FY24.
* Offshore effort mix increased by 10 bps QoQ to 75.4%. Added (7,530) employees in the quarter to close at 3,28,764 employees. LTM attrition was down 270 bps QoQ to 14.6%. Utilization (excluding trainees) was up 70 bps QoQ to 81.8%.
* FY24 revenue guidance revised to 1.0%-2.5% in cc terms and operating margin guidance retained at 20%-22%.
* Declared interim dividend of Rs 18 / share.
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SEBI Registration number is INZ000185632
