Rs 28/Sh Dividend Payout Soon: Motilal, JM, Religare, 3 Other Brokerages Recommend BUY On Infosys, Rs 1,738 TP

Infosys share price started this week's trading session with a bang as it rose nearly 2% on Monday to Rs 1,432.75 apiece. Infosys rallied after its Q4 earnings came in mixed, however, stayed well within management guidance which was a trigger for an upside in the IT stock. Also, Infosys American Depositary Receipts (ADR) is up.

6 brokerages have recommended buying with the highest target price at Rs 1,750 on Infosys.

On April 22, Infosys stock ended at Rs 1,434.50 apiece, up by 1.7% on NSE. The stock's 52-week high and low is at Rs 1,733 and Rs 1,215 apiece respectively.

Ahead, Infosys is set to reward investors with dividend payout. Infosys recommended a final dividend of Rs 20/- per equity share for the financial year ended March 31, 2024, and additionally a special dividend of Rs 8/- per equity share.

The record date for the Annual General Meeting and payment of final dividend and special dividend is May 31, 2024. The dividend will be paid on July 1, 2024.

Meanwhile, in Q4FY24, Infosys posted a consolidated net profit of Rs 7,975 crore, before minority interest, registering a growth of 30% YoY and 30.5% QoQ. Coming to the top-line front, however, consolidated revenue dipped by 2.3% sequentially but marginally up by 1.3% YoY to Rs 37,923 crore. In constant currency, revenue dipped by 2.2% QoQ and was flat on a year-on-year basis.

Infosys Target Price:

Emkay Global On Infosys:

Management suggested that discretionary spending remains weak, as seen in H2FY24. Even after lowering revenue growth guidance through FY24, Infosys missed its implied Q4 guidance which raises concerns about growth predictability.

We cut FY25-26E EPS by 6-6.5%, building on the Q4 miss, lower guidance, and higher ETR. Continual performance miss is likely to weigh on the stock, but valuation is not demanding (~5% FCF yield). We retain BUY with TP now at Rs1,750, on 25x Mar-26E EPS.

Religare Brokerage On Infosys:

Infosys results came in below our expectations but were well within the management guidance. We believe as clients are still on the back foot regarding signing new discretionary deals, so the positive outcome on revenue growth may be delayed by 1-2 quarters but expect overall FY25 to be better than FY24. The growth is expected to be driven by demand for its Gen AI & Cloud as well as automation technology.

Besides, their focus remains on optimization and better utilization which will aid in driving margins. On a financial front, we expect revenue/ EBIT to grow by 3.5%/6.1% CAGR over FY24-26E as we have incorporated management guidance for FY25. We continue to maintain our Buy rating and the same target price of Rs 1,738.

ICICI Direct On Infosys:

We believe that cost optimization & vendor consolidation opportunity along with the ramp-up of deals won previously will provide revenue growth opportunities albeit at a slower pace in FY25. We believe that the company's revenue in dollar terms will grow at 3.4% & 9.5% in FY25E & FY26E respectively. We, thus expect revenue to grow at a CAGR of 7.2% between FY24-26E compared to a CAGR of 9.5% between FY19-24 in dollar revenue.

We believe that Infy will continue to win large deals as it is well placed to win cost optimisation & vendor consolidation deals till the discretionary demand picks up. Also, we believe that despite modest revenue growth in FY25 the company's margin will improve due to the absence of one-off events occurred in FY24 and the margin levers deployed by the company. We expect margins to increase by 40 bps & 50 bps in FY25E & FY26E.

Recovery in discretionary demand by FY25 end (in our view), could drive marked improvement in Infy's growth. We assign a BUY, rating on Infy and value it at target price of ₹ 1,650; at 23x P/E on FY26E EPS.

Motilal Oswal On Infosys:

INFO's FY25 revenue growth guidance came in significantly below our estimate, although deal wins should support the medium-term growth outlook. It has maintained its margin guidance but continues to see upside potential in the medium term, which we see as encouraging.

We expect FY25 revenue growth to be near the upper band of the guidance, at
2.5% YoY CC.

Despite near-term weakness, we expect INFO to be a key beneficiary of the
acceleration in IT spending in the medium term. Based on our revised estimates, the stock is currently trading at 19x FY26E EPS. We value the stock at 22x FY26E EPS, implying a TP of INR1,650.

JM Financial On Infosys :

Two factors undergird this. One, a front loaded growth outlook - suggesting it is based on deals already in hand. Two, even at the upper end, guidance implies c.USD 550mn of incremental revenues in FY25 - mere c.6% of FY24's net new TCV. We therefore see sufficient buffer for discretionary run-offs already built in.

Symbolically too, a narrower band reflects management's higher confidence in the guidance. We bake these in our assumptions as we build 2%/6.5% organic revenue growth for FY25/26E. Our already 7-8% lower than Street earnings and better cash accrual limit cuts to our EPS estimates. Though we don't anticipate a swift rebound in demand, reset in expectations should limit incremental downgrades going forward, in our view.

We continue to value the stock at 23x EPS, in-line with its 5-year median. We upgrade INFO to BUY with an unchanged TP of INR 1,570. Any correction post result should be used to accumulate.

Prabhudas Lilladher On Infosys:

We believe the company's meaningful dependency on discretionary spends is leading to execution challenges and affecting its near-term growth. The project re-scoping and negotiations have again created a knee-jerk reaction to its executions and deliverables. We believe the current macro environment is not favoring its service mix, leading to create near-term leakages, otherwise the long-term story remains intact.

We are baking in revenue growth of 2% and 7% YoY CC with margin improvement of 30bps and 50bps for FY25e and FY26e, respectively. We estimate revenues/earnings CAGR of 4.3%/5.8% over FY24-FY26e. The stock is currently trading at 22x FY26e, we are assigning P/E of 21x to FY26e with a target price of INR 1,375. With that I assume coverage on Infosys with a "HOLD" rating.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.