Infosys, Axis Bank, LTIMindtree, Wipro, Mphasis, Karur Vysys Bank Q2 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Infosys - Guidance increase on expected lines

Infosys Ltd. delivered a strong Q2 top-line leading to the anticipated guidance increase for FY25E. Infosys outperformed peers in Q2 FY25 on anticipated lines (Infosys update: On your marks, get set…), driven by improved demand in BFSI (seven large deals) and an uptick in short-cycle/small to mid-sized deals.

Management commentary pointed to a stable demand environment and an uptick in discretionary in parts of the BFSI vertical. Revenue guidance was raised to 3.75% to 4.50% CC for FY25E following the quarter's 3.1% QoQ CC revenue growth.

The pockets of weakness were in lower large deal wins including net new large deal wins and the postponement of the wage hike cycle to Q4/Q1.

Our revenue growth estimates for FY24-27E assume a similar incremental annual growth rate as the last five years' average.

The recent re-rating of valuation multiples is ‘partially’ priced in these positives. We maintain our Add rating on Infosys with a target price of Rs 2,010, based on 25 times Dec-26E EPS.

Axis Bank - Deposit handicap sustains; unsecured stress elevated

Axis Bank Ltd. beat estimates, largely on account of higher recoveries from written-off accounts and higher market-to-market gains, offset by soft growth on both sides of the balance sheet, and continued stress in unsecured retail credit.

The bank wrote back excess tax provisions owing to a favourable IT order, offset by an increase in prudent provisions. Deposit growth (+2.3% QoQ) appears below the industry with the current account savings account ratio also declining to 40.6% (-125 bps QoQ).

While Axis Bank has been leaning towards enhancing the quality of its deposit franchise, the LCR deteriorated to 115% as the bank aligned itself with best practices on LCR reporting.

The loan-to-deposit ratio stayed elevated at 92% despite modest loan growth (+2.0% QoQ). We argue that Axis Bank faces a steep balancing act in overcoming its deposit handicap, while also managing growth, given continued elevated stress in unsecured retail segments.

We maintain Add with a revised target price of Rs 1,250 (standalone bank at 1.7 times Sep-26 adjusted book value per share).

LTIMindtree - BFSI outperformance

LTIMindtree Ltd. delivered a healthy Q2, supported by strong growth in the BFSI vertical (a common feature across the industry) and continued client mining (growth across all top accounts).

While the deal TCV remained flat YoY at $2.7 billion in H1 FY25, the overall large deal pipeline continues to remain strong at $5 billion. LTIMindtree management remained confident about sustainable momentum in the BFSI and manufacturing verticals with several deals in the pipeline.

Prominent growth drivers include mainframe modernization opportunities in BFSI supported by GenAI, AI embedded in deals, vendor consolidation and ERP modernization, especially in SAP/S4HANA.

However, the management remains cautiously optimistic due to challenges of furloughs, lower working days, select clients in travel, macro uncertainties and wage hike impact in Q3 FY25E.

Maintain Add on LTIMindtree with a target price of Rs 6,435, based on 27 times Dec-26E EPS. The absolute upside return potential is diminished, following the sharp move in the last three months/six months.

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