Infosys has positioned itself as the primary orchestrator of the cloud journey for clients.

Chirag Batavia • 1 December 2020

Infosys Ltd

 In Q2FY21net profit of Rs4840 cr was 10.5% higher than our estimate and grew 20.6% yoy. Operating Cash Flow generation was strong at 121% of net profit. We now expect earnings to grow by 12.2% in FY21E, 12.0% in FY22E and 13.2% in FY23E. 

 Covid has accelerated digital transformation of clients enabled by cloud adoption and will drive demand in the next 3-5 years. Infosys has positioned itself as the primary orchestrator of the cloud journey for clients.

 The management is confident of stable margins with opportunity to expand in the medium term. We forecast 23.2% and 23% EBIT margin for FY22 and FY23, respectively. 

 Infosys’ new deal wins hit a new high of US$ 270 cr. Net new deals at US$ 270 cr was 2.2x of the previous high achieved in Sep-18. The value of new deals won in the quarter is equal to net new deals of the previous five quarters. 

 Post Q2FY21 results we have raised FY21-23 EPS estimates by 8-9%. We expect Infosys to lead the industry on growth. We value the stock at 25x Dec’22E EPS to arrive at Fair Value of Rs.1400.  

Infosys (INFY): BUY
Dated: 1st December 2020
CMP: Rs.1100
Fair Value: Rs.1400
Potential Upside: 27.3%
Market Cap: 4,73,805 Cr
Time Frame: 12 months

Note: The above is a brief note on the company, based on the inputs of KIE research report dated 15th October, 2020 & 12th November 2020, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.       
Disclaimer: http://bit.ly/2n5AxIE


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