Infosys' volume in the quarter increased 4.6% QoQ but revenue growth was lower by 2% QoQ in constant currency (CC) terms due to offshoring. The revenue growth was across verticals & geographies. Digital revenues increased 5.6% QoQ, 38.6% YoY and now accounts for 51.5% of overall revenues. In terms of deal pipeline, it increased 27.3% YoY to US$2.1 billion. Further, despite wage hike, margins were healthy. In terms of guidance, the company expects FY22E revenues to grow in the range of 12-14% with operating margin in the range of 22-24%. Robust revenue guidance points at strong demand environment.
Valuation & Outlook
An improved demand environment, traction in large deals, increase in outsourcing in the US and Europe, vendor consolidation opportunities, captive carve outs and cost takeout deals are expected to drive revenues in the long term. In addition, healthy traction in digital revenues, revenue growth outpacing TCS over the past 12 months and margin gap narrowing with TCS are other key positives. This, coupled with healthy cash conversion, robust capital allocation policy and EPS accretive buyback prompt us to be positive on the stock. Hence, we maintain our BUY rating on the stock with a revised target price of Rs. 1,650 (26x P/E on FY23E EPS) (earlier target price Rs. 1,610).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Infosys_Q4FY21.pdf
Shares of INFOSYS LTD. was last trading in BSE at Rs.1425.8 as compared to the previous close of Rs. 1440.75. The total number of shares traded during the day was 778970 in over 25931 trades.
The stock hit an intraday high of Rs. 1480 and intraday low of 1415.3. The net turnover during the day was Rs. 1122869376.