Infosys Q1 Results Review - Strong Revenue Beat; Growth Guidance Increased: HDFC Securities

HDFC Securities Institutional Equities

Infosys Ltd.’s Q1 sprung a positive surprise on the growth front, led by a revival in the BFSI vertical and an improvement in deal conversion to revenue (similar to Tata Consultancy Services Ltd.).

Infosys’ revenue growth of 3.6% QoQ CC was driven largely by BFSI recovery contributing 2% QoQ to overall growth. In addition, 0.5% QoQ was on a one-time project basis. The increase in guidance in the lower band was on the Q1 beat, while the rise in the upper band included in-tech acquisition.

H1-led/front-ended growth was expected, but the magnitude of outperformance increases the certainty of guidance top-end and perhaps even upside risk to growth estimates, which may keep the valuation multiples elevated.

Importantly, positive commentary on U.S. BFSI can just be the start of the growth revival – TCS/LTIMindtree commentary also had shades of this.

We are not overly concerned by this growth skew; in fact, accelerated T10/T25 bodes well. We have increased growth estimates, largely factoring in the Q1 beat; we maintain Add on Infosys with a target price of Rs 1,900 based on 25 times June-26E earnings per share.

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