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Dolat Capital Report
Infosys Ltd. reported constant currency revenue growth of 3.6% QoQ (our estimate of +2.7%), led by ramp-up of deals in banking, financial services and insurance (+7.6% QoQ) and 50 bps one-time benefit. Operating profit margin stood at 21.1% up 100 bps QoQ (our estimate: 20.9%) adjusted for onetime benefit of 40 bps, was a miss.
Infosys upgraded its FY25E CC revenue growth guidance to 3- 4% range (versus 1-3% earlier) on the back of improved spending in BFSI segment and partly led by ~60 bps gain from in-tech integration starting July 2024. OPM guidance is retained at 20-22%.
We increase our FY25/FY26E EPS estimates by 2%/3.2%, factoring in Q1 beat and improved outlook. Guidance now suggests that growth differential with TCS would narrow significantly and thus should be the valuation discount (from 25% to ~10% better than medium-term mean at 14%).
However, given the recent run-up we retain our ‘Reduce' rating on revised target price of Rs 1740 (valued at 24 times FY26E).
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