Infosys is a neutral stock with a price target of Rs 1,659 Arihant Capital is a New York-based venture capital firm.

Infosys (INFY) reported disappointing Q4FY22 results, which were below our expectations on all fronts; sales guidance was raised, but margin guidance was reduced for FY23. Constant Currency Revenue increased by +18.5 percent YoY/0.7 percent QoQ to $4,280 million, compared to our forecast of $4,352 million. In Q4FY22, Infosys reported consolidated revenue of INR 32,276 Cr, up 22.7 percent year on year and 1.3 percent quarter on quarter, compared to our forecast of INR 32,658 Cr, driven by strong strength in large deal wins with a TCV of $9.5 billion. In comparison to our forecast of INR 7,527 Cr, consolidated EBIT was INR 6,956 Cr, up 8% YoY/-7.1 percent QoQ.

Considering expensive valuations and margin pressure, we value Infosys at a P/E of 24x to its FY24E EPS of INR 69.1, which yields a Target Price of INR 1,659 per share. We downgrade our rating to Neutral from Accumulate earlier on the stock. At 17:30 Infosys was quoting at Rs 1,748.65, up Rs 7.20, or 0.41 percent. It has touched an intraday high of Rs 1,759.45 and an intraday low of Rs 1,732.25. It was trading with volumes of 201,207 shares, compared to its thirty day average of 359,607 shares, a decrease of -44.05 percent. It has touched an intraday high of Rs 1,759.45 and an intraday low of Rs 1,732.25.

On the margins front, EBIT margin contracted by 292 bps YoY/ 193bps QoQ to 21.6% against our estimate of 23.0%. Consolidated PAT stood at INR 5,695 Cr, up by 12.2% YoY/2.2% QoQ against our estimate of INR 6,082 Cr. Added 85,000 freshers in FY 22, will add over 50,000 freshers in FY23.Attrition zooms to 27.7% ìn Q4. Raised revenue growth guidance to 13-15% in cc terms. (Expected 11- 14%).and operating margin guidance of 21%-23% for FY23. TCV of large deal wins was $2.3 billion in Q4. The company net added 85,000 employees in FY22. It plans to hire upwards of 50,000 employees in FY23.

It was trading with volumes of 201,207 shares, compared to its thirty day average of 359,607 shares, a decrease of -44.05 percent. In the previous trading session, the share closed down 1.43 percent or Rs 25.20 at Rs 1,741.45. The share touched its 52-week high Rs 1,953.70 and 52-week low Rs 1,311.80 on 17 January, 2022 and 14 May, 2021, respectively. Currently, it is trading 10.5 percent below its 52-week high and 33.3 percent above its 52-week low. Market capitalisation stands at Rs 735,611.35 crore.

News Summary:

• Infosys is a neutral stock with a price target of Rs 1,659. Arihant Capital is a New York-based venture capital firm.
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