Infosys over TCS? What brokerages say post Q2 results

Market


Shares of Infosys surged over 3% in Thursday’s opening deals after India’s second-largest IT services company reported a 12% rise in net profit for the September quarter at 5,421 crore from a year earlier. Infosys also raised its revenue outlook for as it bets on more contracts from global businesses expanding their digital offerings.

The IT major raised its revenue growth forecast for this fiscal to 16.5-17.5% in constant currency (cc) terms from the earlier projection of 14-16%. It maintained its margin forecast for fiscal 2022 at 22% to 24%.

The rise in revenue growth guidance has come as a positive surprise, as per analysts. “We continue to see scope for a beat and a raise over the next two quarters as INFO benefits from a better large deal focus and demand tailwind,” said Motilal Oswal in a note. 

As it continues to see Infosys as a key beneficiary of an acceleration in IT spends, given its capabilities around cloud and digital transformation, the brokerage has reiterated its ‘Buy’ rating with a target price of 1,960 per share. Motilal said its relative preference for Infosys over TCS is premised on its headroom for increased growth potential, which was further reinforced by this result.

TCS share price has fallen 5% in the last five trading sessions after India’s top IT company last week missed revenue and margin estimates.

Infosys also remains ICICI Securities’ top Buy. “Normal seasonality for December quarter is expected with Infosys and Mindtree hinting at the possibility of furloughs. Like in case of TCS, TCV of deal wins witnessed a downward trend (QoQ) for all the three,” ICICI Securities note stated.

The Bengaluru-based firm said large deal signings stood at $2.15 billion for the quarter ended September 30, with 22 large deals signed during the quarter. The deal pipeline remains healthy, with a good mix of new and renewal deals offering good revenue visibility, said analysts at Emkay. 

“Broad-based revenue growth, upward revision in FY22 revenue growth guidance, healthy deal intake, margin resilience. Though, we did not like the spike in attrition,” they said in a note.

Emkay has maintained its ‘Buy’ stance on Infosys with a target price of 1,910, considering strong earnings momentum and robust demand environment.

Infosys’ broad-based growth across verticals and geographies came on the back strong revenue contribution and higher adoption of digital transformation by clients. Its dollar revenue surged to $3.9 billion, helped by large deal wins and clients’ acceleration of digital initiatives.

“Overall Infosys has reported better than expected numbers especially on the revenue growth front. Post the Q2FY22 numbers we maintain our positive outlook on Infosys with a price target of 2,016,” said Jyoti Roy – DVP- Equity Strategist, Angel One.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

 

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