Infosys Shares Rocket Over 8% After Q3: Buy, Sell Or Hold?

Infosys’ share price rocketed on Friday morning as investors cheered the company’s results for the quarter ended December.

What Happened: India’s second-largest IT services company, reported a 7.3% year-on-year (YoY) decline in net profit, reaching ₹6,106 crore in the third quarter of FY24. This figure was slightly below street estimates of around ₹6,200 crore.

Consolidated revenue for the quarter stood at ₹38,821 crore, marking a 1.3% YoY increase and beating consensus estimates. The company also revised its revenue growth guidance for the full year to 1.5-2%, narrowing it from the previous quarter’s range of 1-2.5%, which itself was revised down from 1-3.5%.

The EBIT margin (operating margin) saw a 70 basis points decline to 20.5%, impacted by furloughs and salary hikes. Infosys retained its operating margin guidance in the range of 20-22%.

Infosys reported a Total Contract Value (TCV) of $3.2 billion for large deals, lower than the previous quarter’s record of $7.7 billion.

Salil Parekh, CEO, Infosys, noted that the company’s performance in Q3 was resilient, with strong large deal wins at $3.2 billion, of which 71% was net new.

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Analyst Reactions: Just like its peer TCS, Infosys’s December quarter results impressed several analysts. Jefferies maintained its “buy” rating for the stock with a price target of ₹1,740. The research firm said that the company beat expectations on revenue and margin. New orders inflow of $2.2 billion also impressed the analysts.

Incred upgraded the stock’s rating from “hold” to “add” raising the price target to ₹1,668 from ₹1,496. The brokerage said that the company’s revenue and EBIT margin were in line with its expectations. The brokerage added that the stock had a relatively reasonable valuation compared to peers.

Kotak Securities also maintained its “buy” rating for the stock with a target price of ₹1,800. The brokerage said that the company’s adjusted EBIT margin beat its estimate by 80 bps. As per the firm, the long-term growth trajectory is still intact, even as near-term growth is under pressure.

Motilal Oswal also maintained a “buy” rating on the stock with a price target of ₹1,750. The domestic brokerage said that margins should bottom out in FY24. The analyst added that steady deal wins will drive growth in FY25.

IDBI Capital also reiterated its “buy” rating on the stock with a target price of ₹1,730. The brokerage said that the company’s numbers for the December quarter were mostly in line with consensus estimates. The brokerage added that it expects discretionary spending to improve in the medium term.

Price Action: Infosys share price was up 7.11% to trade at ₹1,600.50 on Friday morning.

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