Here's a look at what leading brokerages have to say on Infosys post Q1 nos -
Q1 results were materially ahead of our estimates on both revenue/EBIT margins, deal wins were steady and cash conversion was robust. Infosys
surprised positively with guidance of 0-2 per cent Constant Currency (CC) revenue growth and 21-23 per cent earnings before interest and tax (EBIT) margins for FY21. We upgrade Infosys to Buy led by improved positioning in Digital driven by investments over the past couple of years through organic investments, acquisitions and partnerships, improved ability to participate in large deals, the silver linings from Covid-19 in areas of digital transformation, vendor consolidation and captive monetisation where Infosys stands to benefit given its capabilities, breadth of offerings and strong balance sheet position, and better EBIT margin defensability compared to peers. We lift our target price to Rs 975 and value Infosys on 20x 1-yr fwd earnings per share (EPS) of Rs 48.7. We switch our preference to Infosys as our top pick in the space.
Infosys’ results beat estimates substantially (revenue/margins), but the key positive is the reiteration of revenue guidance growth of 0–2 per cent (CC) for FY21. We reiterate that Indian IT is at the bottom of an upcycle—as a significant jump in online activity will accelerate cloud adoption, digital transformation, and market share consolidation. All in all, we are raising the target multiple for Infosys from 21x to 23x, which yields a revised target price of Rs 1,080 (versus Rs 950 earlier).
Infosys has shown visible improvement in performance since the change in management. We expect the company to continue to make steady improvements in financials in the coming quarters. Digital acceleration, large deal wins vendor consolidation and cost rationalisation remain key long term drivers. Further, Infosys has maintained a healthy cash flow generation and has a consistent dividend payout policy. We remain positive on the stock and maintain our BUY rating on the stock with a target price of Rs 1,000/share.
Motilal Oswal Financial Services
Infosys’ 1QFY21 revenue and margin performance reflect its unparalleled resilience in navigating Covid-19-led disruption. Supply-side challenges were managed better than even TCS (10 per cent impact for Infosys v/s 20 per cent for TCS). Despite a higher variable payout (100bp impact), robust EBIT margin expansion (+150bp QoQ) was a key positive.
We upgrade our FY21/FY22E EPS estimates by 11 per cent/12 per cent as we adjust our EBIT margin trajectory to the beat in 1QFY21. Infosys should be a key beneficiary in terms of recovery in IT spends in FY22. Additionally, suboptimal EBIT margin levels and headroom for margin expansion, led by backended productivity benefits, should translate into strong outperformance on EPS growth (v/s the sector). Reiterate Buy with the target price of Rs 1,050.
Infosys surprised the street by reinstating revenue guidance of (0-2 per cent CC YoY growth for FY21) which gives confidence about the growth visibility over the rest of year coupled with strong deal momentum (US$1.7bn, 5.7 per cent QoQ). Strong revenue guidance, deal pipeline, and strong margin beat led to massive upgrades to our earnings estimates. We increase our EPS estimates by 15 per cent/9 per cent for FY22/23E led by revenue and margin upgrade. We have assigned 20X multiple & value it on Sep-22 EPS of Rs 51.8 to arrive at changed TP of Rs 1,037. Infosys is currently trading at 17.1/15.1X earnings of Rs 48.5/55.1 for FY22E/23E respectively. Upgrade to Buy from Hold.