These two analysts still say "sell Infosys" - here's why

However, Infosys' EBIT margin fell short of expectations by 38 basis points. When compared to the September quarter, EBIT margin at 21.5 percent was 5 basis points below the 21.55 percent mark.

Nirmal Bang has had a sell recommendation on Infosys since April of last year. Its price target of Rs 1,161 implies a further 22 percent downside on Infosys from Thursday's closing price.

Infosys' EBIT margin was also lower than Nirmal Bang's estimate of 22.3 percent. The firm says that Infosys could not fully benefit from the rupee depreciation due to currency hedging. The rupee weakened by 3 percent against the US Dollar during the December quarter.

Deal wins at $3.3 billion during the quarter were the strongest for Infosys in nearly two years. Nirmal Bang believes that this has been aided by cost optimisation deals where tenures are longer, which will result in lower Annual Contract Value. Although the management has indicated that the deal pipeline is strong, the brokerage suspects it to be burgeoning due to slower decision-making among clients and deals with longer tenures.

While the management did not share any guidance for the next financial year, Nirmal Bang assumes a low-mid single-digit growth as well as some price compression. On the contrary, consensus expects a high single-digit growth, thereby implying a soft landing in the US.

At 6 percent, Infosys' third-party items for service delivery to clients is much higher than its peers and may have helped win integrated deals during the year, according to Nirmal Bang. However, the brokerage said that a continuation of this strategy may end up being margin dilutive in the times to come.

The third-party process is where the service is not done by the sales organisation where the customer places the order. Instead, it is forwarded to an external vendor who sends or provides the service directly to the customer.

Nirmal Bang has broadly maintained its estimates on Infosys until financial year 2026. Its price target of Rs 1,161 values the company at 17.9 times September 2024 Earnings Per Share.

Ambit Capital is the other firm that has a sell recommendation on Infosys.

Shares of Infosys have recovered from the day's low and are currently trading 0.4 percent higher at Rs 1,486.70.