Shares of Infosys rose in Wednesday’s trade, extending their gains to the sixth straight session. The stock climbed 0.71 per cent to hit a day high of Rs 1,550.70 over its previous close of Rs 1,539.75. At today’s high level of Rs 1,550.70, the stock traded 14.40 per cent higher than its 52-week low of Rs 1,355.50, hit on September 26 last year. Yet, the scrip traded 20.23 lower than its one-year high of Rs 1,944, touched on January 18, 2022.
That said, Geojit Financial Services has given a ‘Buy’ call on Infosys, suggesting a potential upside of 11 per cent (calculated at a market price of Rs 1,525). The brokerage has given a target price of Rs 1,692 on the counter for an investment period of 12 months.
“The company reported exceptionally strong earnings, driven by growth in its digital offerings and core services, despite a seasonally weak quarter. A strong portfolio, a diverse service line and an aggressive approach would help the company sustain its performance in the future,” Geojit said in its latest report.
In addition, the brokerage underlined, “Infosys has retained its margin guidance for FY23 between 21 per cent and 22 per cent. It has increased the revenue guidance from 15-16 per cent to 16-16.5 per cent. During Q3, the company reported a steady decline in the attrition rate. The annualised attrition rate decreased 6 per cent. Consequently, its LTM attrition reduced to 24.3 per cent, compared with 27.1 per cent in Q2 FY23.”
Geojit also cited that Infosys has reported a strong total contract value of $3.3 billion (the highest in the last eight quarters) with 32 large deals.
“All verticals are gaining traction, as reflected in the deals won. Energy, utilities, resources and services grew 32.5 per cent YoY, and manufacturing grew 41.7 per cent YoY, with five deal wins each during the quarter. Communications grew 18.4 per cent YoY, and financial services rose 12.1 per cent YoY, with six deal wins each. Retail increased 18.8 per cent YoY, with seven deal wins. Further, the company won two deals in life sciences and one in high-tech,” Geojit said.
On the valuation front, the brokerage said, “Despite the prevailing macroeconomic uncertainty in the market, deal wins and the project pipeline for the company remain solid, positioning it well to capture market share with its strong execution. We see strong sustained demand driving revenue growth and contributing to continued earnings growth over the long term. In addition, the valuation is no longer expensive, which makes the risk-reward profile attractive. We upgrade our rating to ‘Buy’ on the stock, with a rolled forward target price of Rs 1,692 based on 22x FY25E adjusted EPS.”
Q3 numbers
Infy, India’s second-largest software exporter, reported a 13.4 per cent year-on-year (YoY) rise in net profit at Rs 6,586 crore for the December quarter (Q3 FY23) compared with Rs 5,809 crore in the same quarter a year ago.
Revenue for the third quarter rose 20.2 per cent YoY to Rs 38,318 crore compared with Rs 31,867 crore in the year-ago quarter. Dollar revenue came in at $4,659 million, up 2.3 per cent sequentially.
Technical view
The stock was last seen trading higher than 5-day, 20-, 100- and 200-day moving averages but lower than 50-day moving averages. Infosys has an average target price of Rs 1,718.57, Trendlyne data showed, suggesting a potential upside of Rs 11.02 per cent. The stock has a one-year beta of 1.11, indicating high volatility.
The counter’s 14-day relative strength index (RSI) came at 57.61. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 28.74.
A total of 1.12 lakh shares changed hands today, which was lower than Infosys’ two-week average volume of 2.81 lakh shares. Turnover on the counter stood at Rs 17.27 crore, commanding a market capitalisation of Rs 6,50,990.11 crore.
Meanwhile, Indian equity benchmarks extended their gains and rose sharply, led by gains in banks, financials, metals and technology stocks.
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