For Q2FY21, the information technology (IT) consulting & services company's revenues increased 3.8 per cent quarter on quarter (QoQ). The biggest surprise for Infosys, however, came from margin gain — a healthy 260-basis points (bps) improvement over the preceding quarter and 360 bps over the corresponding period in the previous financial year at 25.4 per cent. This narrowed the margin gap with industry leader TCS whose margin at the end of Q2 stood at 26.2 per cent. The large deal pipeline increased by 80.7 per cent QoQ mainly due to addition of Vanguard deal.
has consistently outperformed Tata Consultancy Services (TCS) over the past few quarters and also narrowed the margin gap between the two companies. In addition, healthy deal wins are expected to help company in making steady improvement in financials in coming quarters,” ICICI Securities said in a note.
Digital acceleration, large deal wins, vendor consolidation and cost rationalisation remains key long term drivers. Further, Infosys has maintained healthy cash flow generation and has a consistent dividend payout policy. Hence, we remain positive on the stock, the brokerage firm said.
Motilal Oswal Securities expects some margin benefits to be sustainable (driven by automation, etc.) for Infosys. On the other hand, tailwinds (such as increased offshoring, lower attrition, deferred wage hikes, and lower travel/SGA costs) as a result of the pandemic are likely to partly wane out later on as the situation normalizes further over the next few quarters, it said.
The brokerage firm expects Infosys to be a key beneficiary in terms of recovery in IT spends in FY22. Infosys should be a key beneficiary in terms of recovery in IT spends in FY22. Additionally, leading operational performance in 1HFY21, coupled with strong deal wins, should translate to strong outperformance on EPS growth (v/s the sector), it said.
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