These Stocks Are A Buy, Says India's Top Research Backed Brokerage

Updated: Thursday, July 15, 2021, 12:05 [IST]

One of India's leading research backed brokerage firm has placed a "buy" on the stock of Infosys and L&T Information Technology. Brokerage house, Motilal Oswal Institutional Equities has suggested buying these two stocks for long term gains. Investors are also advised caution along with these recommendations, given that the Sensex today has once again hit a new lifetime high. It's better to put a little money and wait for a downside, rather than investing large amounts at one go.

A stock that is on the buy list of Motilal Oswal is L&T Technology Services. The brokerage house sees the firm as a key beneficiary of growing tech adoption in ER&D, which should grow by 2 times that of IT Services over FY18-23E. L&T Technology Services reported a good set of quarterly numbers. Revenue rose 4.2% QoQ (est. 2.8%) to $205.7 million in 1QFY22. In constant currency, revenue grew 4.3% QoQ, but was flat YoY. The company won six deals with a TCV of over $10 million. This includes two over $25 million deals in 1QFY22.

"With a strong demand commentary across industries and key regions, and capability to deliver services during the lockdown, L&T Technology Services should not see a meaningful disruption in the business. We bake in 18.6% revenue growth for FY22E, partially on account of a favorable base. Moreover, with Digital at 53% of revenue, it should also benefit from 18% growth in Digital ER&D spends over this period. We have built in 18%/33% revenue/EBIT CAGR over FY21-23E. We value the stock at 31x FY23E EPS and maintain our "buy" rating," the brokerage house has said.

Infosys

According to the brokerage house, Infosys reported strong broad based growth of 4.8% QoQ constant currency, beating its own estimates of 3.9%. Motilal Oswal also expects Infosys USD revenue growth guidance to 14-16% CC YoY from 12-14%.

We have cut our FY22E/FY23E EPS estimate by 3.2%/1.6% to encompass margin pressure due to ongoing supply crunch in the industry and expected increase in travel expenses. We continue to view Infosys as a key beneficiary of a recovery in IT spends in FY22, given its capabilities around Cloud and Digital transformation. We value Infosys at 27x FY23E EPS and reiterate our Buy rating," the brokerage firm has said.

Infosys: Solid financial performance for the June quarter

Infosys saw revenues in constant current terms rising by 16.9% YoY and 4.8% QoQ. Reported revenues at $3,782 million, saw a growth of 21.2% YoY. Digital revenues at 53.9% of total revenues, YoY CC was up 42.1%. Operating margins at 23.7%, saw an increase of 1.0% YoY and decline of 0.8% QoQ.

"Our clients continue to be supportive of the multiple initiatives we have undertaken; they value the delivery commitments we have met even during these extraordinary times", said Pravin Rao, Chief Operating Officer, Infosys. "As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge. We plan to meet this demand by expanding our hiring program of college graduates for FY 22 to 35,000 globally", he added.

Broking firm, Motilal Oswal has recommended to buy the stock with an upside target of 13% from the current levels.

Disclaimer

Stock market investment is subject to risk associated with the stock markets and hence investors need to be very careful. Neither the author, nor the brokerage, nor Greynium Information Technologies Pvt Ltd would be responsible for losses incurred based on a decision to buy into the stocks based on the above article. The stocks are picked from the brokerage report of Motilal Oswal. Stock indices are currently at lifetime highs and hence investors needs to be cautious.