Infosys shares gain 2% post strong Q3 results; here's what brokerages say

The technology company’s net profit grew nearly 12 percent from a year-ago period to Rs 5,809 crore, beating Street estimates. A CNBC-TV18 poll of analysts had estimated a net profit of Rs 5,701 crore. In dollar terms, the revenue stood at $4,250, which is up 6.3 percent QoQ. The CNBC-TV18 poll had projected a growth of 3.1 percent from the previous quarter’s reading of $3,998 million.

Raising revenue guidance came as a cheer for investors. The Street had expected Infosys to tighten FY22 revenue guidance to 17.5-18.5 percent as against the company's move to hike revenue growth guidance to 19.5-20 percent from 16.5-17.5 percent earlier.

Growth remained broad-based and deal momentum was robust with digital transformation rapidly scaling across verticals and regions, the IT major said.

Salil Parekh, CEO and MD, Infosys, expects the healthy technology spend to continue with large enterprises progressing on their digital transformations.

Here's what the brokerage firms say:

The company is well-equipped to benefit from a strong demand environment given its strategic investments in scaling-up digital and cloud capabilities, according to Sharekhan. The brokerage house has maintained its 'buy' call on the stock with a revised target price of Rs 2,300 owing to strong revenue growth potential, healthy deal wins, market share gains and higher discretionary spends, it added.

Revenue growth surprised the most amongst peers, margin pressures incrementally appear to be easing while the management commentary pointed to continued momentum in FY23. Considering Infosys' share price was already strong and Q3 results are solid, the stock should further close the valuation gap with TCS, according to Morgan Stanley. The foreign brokerage house has hiked its target price on the stock to Rs 2,250 from Rs 2,110 and also revised its EPS estimates upward by 2-3 percent for FY22-24 for Infosys. It has maintained its 'overweight' rating on shares of the IT major.

Infosys has raised its FY22 growth guidance on the back of strong Q3. Amidst high attrition, the company has managed its margins well led by pyramid management. With this, the brokerage house has raised its FY22-24 estimates by 2-4 percent and expects Infosys to deliver EPS to grow by 15 percent compounded annually over FY22-24. Infosys remains Jefferies’ top pick and has maintained its ‘buy’ rating but has revised its price target of Rs 2,270. Strong growth momentum will help sustain premium valuations, according to the foreign brokerage house.

The brokerage firm has increased its EPS estimates by 2 percent for FY22, 4 percent for FY23 and by 4.5 percent for FY24. Credit Suisse has an ‘outperform’ call on the stock with a hike in target price to Rs 2,350.

The brokerage firm has an ‘outperform’ recommendation on shares of Infosys and has raised its target price to Rs 2,290. Bernstein also hiked its EPS estimate for Infosys by 1.2 percent for FY22 and by 3.1 percent for FY23.

With a strong beat on the revenue front, margin performance being in-line with the prediction, good increase in growth guidance and upbeat management commentary, Citi raised its target price on the IT major’s shares to Rs 2,180 from Rs 2,140 while maintaining its ‘buy’ rating. The brokerage house raised FY22-FY24 EPS estimates by 2 percent each.

The management expects attrition to remain high for the next few quarters, the global brokerage house pointed. Goldman Sachs has hiked EPS estimates by up to 3 percent over FY22-26 with a ‘buy’ call on the stock and a target price of Rs 2,415.

Infosys has seen healthy revenue growth and a strong deal pipeline especially in the Europe region where it is seeing good traction. Further, the margin resilience of the company as compared to TCS has been a key highlight of the quarter, ICICI Direct Research said. However, the supply-side challenges continue to push LTM attrition higher and Infosys expects it to stabilise in a couple of quarters. The company mentioned that clients are now open to discussing price increase amid cost pressure which is a positive, according to the brokerage house.