Why Infosys share price could still rise another 14%

“Given looming global headwinds, the outlook for financial year 2024 looks uncertain. However, we believe the structural growth story for the Indian IT sector remains intact. We maintain a Buy rating on Infosys with an unchanged PT of ₹1,730 given strong deal pipeline, its end -to-end capabilities and prowess in digital areas, analytics, automation and Cobalt cloud. We advise investors to adopt a staggered approach to invest into the stock from long-term perspective,” Sharekhan said in a report.

Some other brokerages have also maintained a positive outlook on the stock and the company post its third quarter results.

Here are some key positives and negatives from the Infosys results, as compiled by the brokerage:

Key positives

– Large deal TCVs reported in Q3FY23 was the strongest in the last 8 quarters at $3.3 billion

– FY23 revenue growth guidance increased to 16-16.5% CC

– LTM attrition moderated by 280 bps sequentially. Attrition rate declined to 24.3% in Q3FY2023 versus 27.1% in Q2FY2023.

Key negatives

– EBIT margins was flat sequentially at 21.5% and below our estimate of 22.4%.

– Utilisation rate at 81.7% is the lowest in the past 10 quarters

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The key risk to the brokerage’s estimates is appreciation in rupee or adverse cross-currency movements, slackening pace in deal closures, and even a constraint in local talent supply in the US would affect earnings.

Infosys raised its full-year revenue growth forecast amid a robust deal pipeline even as its quarterly earnings missed analysts’ estimates as wage costs soared.

The Bengaluru-based company said it expects revenue to grow 14-16% in constant currency this fiscal, faster than the 13-15% pace it predicted about three months ago. Infosys, however, retained its operating margin forecast at 21-23% for the year to 31 March, though the management expects it to be at the lower end of the range.