This IT Stock Is Axis Securities’ Pick of The Week For A Target Price of Rs 1895

Infosys is India's second-largest IT services exporter, and its technologies and services have a significant worldwide footprint. The company's shares have returned +404.25 (30.26 percent) in one year, but are down -158.45 (-8.35 percent) year to date (YTD). The stock has grown by +33.35 (1.95 percent) in the past 6 months and by +25.00 (1.46 percent) in the last month. The stock has gained +70.40 (4.22 percent) in the previous five days on the NSE and is currently trading at a market price of Rs 1,740.00 as of 7 Mar 2022, 1:18 pm IST. The domestic brokerage firm Axis Securities has placed a buy call on the stock for a target price of Rs. 1895 and claims the stock as a pick of the week as of 7 March 2022 from the IT space.

Investment rationale for Infosys as per the brokerage

• IT service provider's engagement with its partner network has expanded beyond certifications into setup of co-innovation centers, building industry solutions, ISV partnerships and joint sourcing of deals. These partnerships play a significant role in implementation, rollouts & upgrades, validation and support services. Recent deal trend continues to be robust for Infosys and is reflective of traction in BFSI, Retail & CPG, Manufacturing and BFSI verticals. Infosys will continue to invest in COBALT ( Its digital product), Digital Talent and S&M which is imperative to drive growth. We believe that COVID outbreak will create huge opportunity across geographies for Infosys to post strong organic growth over different verticals.
• Infosys management has taken cost optimization efforts which help them to gain long term sustainable operating margins. There are some tailwinds like better service mix, reducing the marketing spend, lowering travel cost, employee restructuring and improving utilization. We believe gaining the efficiency over business will help them to get more profitability and higher return ratios.
• Infosys deal pipeline remained industry leading in Q3 FY22 at $2.53 bn. Infosys won many large transformation deals despite uncertainty and across verticals like BFSI, Communication, manufacturing, Automobile. This healthy deal pipeline will help to improve revenue visibility for FY22E and FY23E.

Buy for a target price of Rs. 1895

Axis Securities has claimed that "Infosys Ltd (Infy) reported Q3FY22 revenue of Rs 31,867 Cr, up 7.7% QoQ and 7% QoQ (in CC terms). The company's operating profit stood at Rs 7,484 Cr, reporting a growth of 7.3% on a QoQ basis. However, its operating margins de-grew by 10 bps QoQ to 23.5%, largely led by the unfavourable impact of higher subcontracting costs. Its net profit for Q3FY22 stood at Rs 5,809 Cr, registering a growth of 7.1% QoQ. Infy management has revised revenue growth guidance for FY22 to 19.5%-20% (from 16.5%- 17.5% earlier) in CC terms in light of a strong deal pipeline and robust demand. We recommend a Buy the stock for a target price of Rs 1895."

Disclaimer

The stock has been picked from the brokerage report of Axis Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.