InvestorQ : How do you see the stock outlook for Infosys post the latest quarter results?
Rashi Mehra made post

How do you see the stock outlook for Infosys post the latest quarter results?

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Archita Jajjoo answered.
1 month ago
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The Mar-22 quarter was mixed with the bottom line and operating profit growth failing to match up to the top line growth. EBIT margins for the quarter also slipped by nearly 190 bps to 21.6%. Infosys has guided for operating margins of 21% to 23% in the coming year. One concern has been the sharp rise in attrition to 28% levels during the quarter, the highest level, it has ever seen. Here is what brokerages opine on Infosys outlook.

According to Nomura, the big concern will be operating margins, especially with higher-than-usual salary increments in FY23 and the return of discretionary spends like travel and visa costs. Nomura is of the view that while price hikes are being done, it takes time to reflect in margins. Nomura has cut the price target of Infosys to Rs.2050.

Jefferies believes that Infy disappointed on growth and they expect earnings to grow at a lower rate of 14% between FY22 and FY24. However, Jefferies believes that the 10% discount over TCS valuations should keep investors interested in Infosys. They have also pegged the target price of the stock at Rs.2,050 with 28X P/E holding.

Morgan Stanley is of the view that FY23 revenue growth guidance was stronger-than-expected at 13-15%, although margin guidance of 21-23% was just as per market expectations with no negative surprises. Morgan Stanley believes that the Q4 numbers of Infosys were an overall miss although the guidance should keep investors interested.

HSBC Global Research is of the view that post COVID pandemic, Infosys had enjoyed a margin tailwind of 600 bps which appears to be topping out. Also, most of the tailwind was consumed by wage inflation and sub-contracting costs. HSBC sees margins risks increasing for Infosys in FY23. HSBC Global Research has downgraded Infosys to from a Buy to Hold on downside risk to profitability and limited upside to growth. Targets have been cut by 8%.

Finally, Motilal Oswal has a mixed view on Infosys. It sees a robust demand environment, and strong revenue guidance for FY23 as positives. Motilal is pegging 16% growth and more aggressive operating margins of 22.4%. Motilal also expects Infosys to benefit from acceleration in IT spends and its catalytic role in Digital transformation. Motilal is the only major brokerage to have a strong buy on Infosys.

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