Infosys witnessed a remarkable 7% surge in its share price during early trade on Friday, propelled by the IT services giant’s better-than-expected earnings report for the third quarter of FY24, even in the face of a decline in revenue and net profit. Infosys shares rallied as much as 7.09% to reach Rs 1,600.20 apiece on the NSE.
India’s second-largest IT services company reported a 1.7% decrease in consolidated net profit for Q3FY24, amounting to ₹6,106 crore compared to ₹6,212 crore in Q2FY24. The quarter’s revenue also experienced a 0.4% dip, landing at ₹38,821 crore from ₹38,994 crore QoQ. In constant currency (CC) terms, revenues dropped to $4,663 million.
Despite these challenges, Infosys adjusted its revenue growth guidance for FY24 to 1.5% – 2%, a slight narrowing from the previous 1% – 2.5%, while maintaining its margin guidance at 20-22%. Additionally, the company announced a definitive agreement to acquire InSemi, a prominent semiconductor design and embedded services provider, for ₹280 crore.
Analysts continue to express optimism about Infosys’ growth outlook, with several brokerages raising their target prices for Infosys shares in response to the promising Q3 performance.
Here is what top brokerages are predicting on Infosys
Jefferies on Infosys
Infosys exceeded growth and margin expectations in Q3, with an impressive net new order book of $2.2 billion, providing a strong foundation. The foreign brokerage, Jefferies, expressed comfort in the company’s 13% EPS CAGR expectation over FY24-26E, citing robust deal wins.Consequently, Jefferies raised Infosys’ estimates by up to 2%, maintaining a ‘Buy’ rating and setting a target price of ₹1,740 per share.
Motilal Oswal on Infosys
In its recent report, Motilal Oswal acknowledged Infosys’ decision to narrow its FY24 revenue growth guidance while holding the mid-point, signaling a more subdued second half of the fiscal year. Despite this, Infosys remains resolute in its margin guidance, a positive indicator. Motilal Oswal foresees FY24 revenue growth around 1.9% QoQ, aligning closely with the upper band of the guidance.
Despite short-term challenges, Motilal Oswal views Infosys as a key beneficiary of the expected acceleration in IT spending over the medium term, valuing the stock at 22 times FY26E EPS, with a target price of INR1,750.
Phillip Capital on Infosys
Phillip Capital marginally increased its FY25-26 PAT estimates for Infosys and adjusted its CC revenue growth forecasts. The brokerage now expects 1.7%, 6.3%, and 9.6% CC revenue growth in FY24, FY25, and FY26, respectively, with upgraded target multiples. Phillip Capital upgraded its rating to ‘Buy’ and raised the target price to ₹1,690 per share from ₹1,520, anticipating a growth revival starting H1FY25.
Emkay Global Financial Services on Infosys
Emkay Global noted Infosys’ slightly better-than-expected operating performance in Q3. The brokerage expects growth acceleration in FY25, citing factors like the ramp-up of large deals, a robust deal pipeline, and an anticipated recovery in discretionary spending. Emkay Global adjusted FY24-26 EPS estimates marginally and maintained a ‘Buy’ call with an unchanged target price of ₹1,850 per share, based on 25x its Dec-25E EPS.
BNP Paribas on Infosys
Infosys has successfully navigated challenges related to delayed deal ramp-ups, instilling confidence by ensuring that deals are now progressing as scheduled. This development alleviates concerns surrounding revenue conversion. Concurrently, the company’s margin levers have been set in motion, providing management with the impetus for further expansion. Additionally, Infosys is positioned as a significant beneficiary of the growing adoption of General Artificial Intelligence (GenAI). Despite its NTM P/E discount to TCS closely aligning with its last 5-year average, Infosys remains an attractive prospect.
Analysts anticipate a growth surge for Infosys, fueled by recent mega-deals gaining traction and an optimistic outlook for the macro-economy. In light of 3QFY24 results and management guidance, analysts have made slight adjustments to estimates while maintaining an Outperform rating and an unchanged DCF-based target price of Rs 2,000.