Infosys in spotlight after declaring results and buyback: Should you buy or sell?

The board of Infosys also announced an interim dividend of Rs 16.50 per share, an increase of 10 percent over the FY22 interim dividend.

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Infosys share price surged nearly five percent in early trade, a day after the company reported profit above estimates for the September quarter.

India’s second-largest IT services company Infosys on October 13 posted a consolidated net profit of Rs 6,021 for the quarter, up 11.1 percent from a year ago.

Revenue from operations stood at Rs 36,538 crore, expanding 23.4 percent.

Sequentially, revenue grew six percent while net profits rose 12.3 percent.

The company also said it will be buying back shares worth Rs 9,300 crore in order to reward its shareholders. The firm has set the maximum buyback price at Rs 1,850, a premium of 30 percent over the last closing price.

The board of Infosys also announced an interim dividend of Rs 16.50 per share, an increase of 10 percent over the FY22 interim dividend. The total amount of the interim dividend will be about Rs 6,940 crore.

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Here is what brokerages have to say about the stock and the company after June quarter earnings

Credit Suisse

We have kept an outperform rating on the stock with a target of Rs 1,710.

The Q2 revenue was in line, while margin surprised. The deal wins and hiring suggest growth momentum will continue.

We expect macro headwinds to slow IT services growth in FY24.

The company may see less impact versus its close peers due to its large share of digital.

CLSA

We have kept a buy rating on the stock and raised the target to Rs 1,800 on the back of strong deal wins, easing supply pressure, and attractive buyback.

The company is a preferred sector pick and a part of CLSA India focus portfolio. Increased comfort in near term but long-term visibility remains low.

The margin headroom has improved and we expect downside support from proposed buyback.

Macquarie

We have maintained outperform rating on the stock with a target of Rs 1,870.

The Q2 results saw EBIT margin beat estimates even as revenue missed them. There was a good margin improvement and still plenty of headroom in utilisation.

Jefferies

We have kept a buy rating on the stock with a target of Rs 1,700.

The Q2 was ahead of estimates, with revenues up 4% sequentially.

The margin surprised positively due to lower subcontracting costs.

Nomura

We have maintained a buy rating on the stock and raised the target to Rs 1,640.

Q2 was a mixed bag, while improving margin is good. Incremental levers raise confidence on margin recovery.

We estimate margin of 21.2% in FY23 and expect growth outperformance versus TCS to continue.

JPMorgan

We have kept a neutral rating on the stock with a target of Rs 1,600.

Q2 was a solid quarter with respectable organic growth on a high base. FY23 margin forecast implies sequential weakness in margin.

The buyback is mildly positive and should support the stock.

UBS

We have kept a neutral rating on the stock with a target of Rs 1,490.

It was a well-balanced quarter and enough to cheer the market. The company delivered a strong quarter in terms of TCV (total contract value) and surprised by beating consensus expectations on operating margin.

The margin expansion is enough to elicit a positive reaction, with buyback being add-ons.

Motilal Oswal

Infosys posted a strong set of earnings. Demand and the order book remain robust. Strong FY23 growth forecast and high headcount addition provides further demand visibility.

We expect the company to deliver margin at the lower side of its forecast band, with strong growth and reduced dependence on sub-contractors as attrition falls.

We expect Infosys to be a key beneficiary of an acceleration in IT spends. Based on our revised estimates, the stock is currently trading at 22x FY24 earnings per share. We value the stock at 25x FY24 EPS, implying a target of Rs 1,630.

At 09:34 hrs Infosys was quoting at Rs 1,475.00, up Rs 55.25, or 3.89 percent on the BSE.

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