Infosys Ltd. share price target

We attended Infosys (INFO)'s Analyst Day, wherein the management shared their views on the industry outlook and drivers for future revenue and margin expansion. Here are the key highlights from the meet: Overall, the commentary from Infosys was quite positive as the management expressed a) their confidence about returning to pre-COVID growth levels; b) scope for a further upside on operating margins; c) significant opportunity from the shift to cloud; d) acceleration in the deal pipeline since the pandemic. It further highlighted the ambition to eventually have 33% of the workforce...

INFO continues to focus M&A; to enhance its digital solutions capabilities to take full advantage of the acceleration of digital transformation at the market place. We remain confident of INFO getting to double-digit growth in FY22 and forecast...

Profitability in good situation: The company believes that its investment phase is now behind and thus can leverage growth and many of its structural drivers hereon. It believes that several of the existing cost reduction factors such as Travel, Visa, Facilities expenses, Professional charges, Brand buildings may only go back to pre-pandemic level in a gradual manner and would continue to provide support in near term (although beyond control). Sustained remote working would lead to more savings in terms of better talent availability, improved productivity and...

We expect Infosys to deliver above guidance in FY21 a) notwithstanding margin headwinds (wage hikes in 4Q, large deal ramp-up, seasonality, above margin factors, etc.) and b) based on strong deal wins. Reiterate Infosys reported revenue (USD) / EBIT / PAT growth of 3%/27%/21% v/s our estimate of 1%/15%/12% YoY. Also, a 2324% EBIT margin band cannot be considered sustainable for now; this will have to be Significant margin tailwinds have emerged as a result of the pandemic increased offshoring, lower attrition, and reduced travel/SGA costs which would partially return as travel restrictions are eased and the environment The deal pipeline remains strong as clients look at accelerating their digital transformation and undertake cost efficiency measures. We value the stock at 25x FY22E EPS (10% discount to employees and offer wage hikes effective from 1 In terms of verticals, Hi Tech was a key growth driver (24% YoY CC), while BFSI and Life Sciences reported modest growth.