Infosys: Infosys surges 5% after strong Q2, can gain 15-20% in near term


Mumbai: Infosys shares rallied nearly 5% on Friday as analysts bumped up their price targets on the stock after India’s second-largest IT exporter posted a better-than-anticipated 11% increase in consolidated net profit for the September quarter.

Most analysts believe the company will continue gaining market share in technology adoption. Given strong deal wins, robust revenue guidance and a ₹9,300-crore buyback announcement, analysts said the stock has a 15-20% upside in the near term. The stock closed at ₹1,477 on Friday.

“We believe

is well-placed for encouraging growth from a long-term perspective given its multiple long-term contracts with the world’s leading brands,” said a note by Axis Securities. “Though the company’s margins are likely to be under pressure in the short term, primarily due to rising subcontracting costs, richer revenue visibility gives us confidence in its business growth moving forward.”

Infosys revised revenue growth guidance to 15%-16% in consolidated terms for FY23 from 14%-16% earlier in light of the company’s deal pipeline and intact demand. Furthermore, it has retained its margin guidance of 21%-22% for FY23.

“While the spectre of macro risk remains an overhang, we believe a likely pause in downgrades and the proposed buyback could revive investor interest,” CLSA said in a note while raising the price target from ₹1,750 to ₹1,800. “Infosys is our preferred sector pick and a part of the CLSA India Focus portfolio.”

The stock currently trades at an estimated Price to Earnings (PE) ratio of 22 times. Infosys intends to buy back over five crore shares, approximately 1.19% of the company’s paid-up capital, from the open market at a maximum price of ₹1,850 per share. Analysts expect downside support from the proposed $1.1 billion buyback.

Infosys shares have declined 16% in the last six months and are currently trading 25% lower than its 52-week high price.

Kotak Institutional Equities has raised its FY23-25 estimated EPS by 1-3% based on the change in currency forecast.

“We believe there are enough levers to expand margins over the next two years and retain our margin forecasts. We bake in revised INR/USD forecasts resulting in a 1-3% upgrade in our EPS forecasts,” Kotak said in a note.



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