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Infosys shares tank 15%, hit 52-week low on weak Q4 earnings. Should you buy or sell?


Infosys shares on Monday hit a 52-week low of Rs 1,185.30 on the NSE as the shares of India’s second-largest IT company tanked 15% on below par Q4 earnings. The Bengaluru-based company missed Street estimates and reported an 8% year-on-year (YoY) growth in its net profit at Rs 6,128 crore, while revenue from operations jumped 16% to Rs 37,441 crore. Both revenue and profit figures were below the analysts’ estimates. (Read full earnings here)

An ET Now poll had projected the net profit to be around Rs 6,550 crore while the revenue figure was pegged at Rs 38,850 crore.

The results were announced after market hours on Thursday. Indian equity markets were closed for trading on Friday on account of Ambedkar Jayanti.

This is what top brokerages recommend on Infosys following Q4 numbers:

  • Jefferies: Buy | Target: Rs 1,570 | Upside: 13%

Despite calling Infosys’ January-March 2023 quarter results “shocking”, Jefferies maintained a ‘Buy’ on the second-largest IT services company for a price target of Rs 1,570. The brokerage said that FY24 guidance suggests a weak demand outlook and therefore cut its FY24-25 estimates by 3-6%. It said that it sees potential stock fall on weak Q4 results as an attractive buying opportunity.

Key risks include weaker revenue growth, lower margin, unfavourable currency and corporate action, the brokerage said.

  • Nomura: Neutral | Target: Rs 1,290 | Upside: 28%

Brokerage firm Nomura has downgraded Infosys to ‘Neutral’ with a price target of Rs 1,290. It said that guidance and deal wins indicate a weak outlook for the company. Nomura has cut FY24-25 EPS by 8-9% and reduced the valuation to 18X from 21X earlier. It further said that the growth differential with Tata Consultancy Services is set to narrow.

  • HDFC Securities: Add (from Buy) | Target: Rs 1,470 | Upside: 6%

HDFC Securities cut its estimates by 4-5% and downgraded Infosys to ‘Add’ from an earlier ‘Buy’ stance. It has revised the target price to Rs 1,470 (from Rs 1,830) which is based on 21X December-24E (25X earlier). This is at a 20% discount to TCS’ valuations based on a relative growth discount, the brokerage said.

Recent senior-level exits and the possibility of continued stress from large accounts are risks to growth, it added.

  • Kotak Institutional Securities: Buy | Target: Rs 1,470 | Upside: 6%

Kotak Institutional Equities cuts its revenue growth and margin estimates, leading to a 6-7% cut to FY2024-25E EPS. Though it maintained a ‘Buy’ with a FV of Rs 1,470 (Rs 1,700 earlier), valuing the company at 20X FY2025E EPS. “We expect muted 1QFY24 with growth recovery in 2HFY24, led by large/mega deal revenue,” the brokerage said.

  • Sharekhan: Hold | Target: Rs 1,500

Sharekhan downgraded Infosys stock to ‘Hold’ with a revised target price of Rs 1,500. Weak management commentary coupled with recent top-level exits fail to instil confidence in the near-term business outlook amid an uncertain demand environment, it said. Further, the quarterly ask rate of 1.7-2.8% for FY24 cc revenue guidance of 4-7%, appears steep given tough near-term macro environment, the brokerage firm noted. Given the weak quarterly numbers and uncertain macro backdrop, we expect the stock to underperform, it said.

“Hence, we downgrade the stock to hold with a revised price target of Rs 1,500. At the CMP the stock trades at 23.4X its FY2024E EPS and 21.7x its FY2025E EPS,” Sharekhan said.

  • BOB Capital Markets: Buy | Target: Rs 1,760

BoB Caps maintained a ‘Buy’ rating and continued to value the stock at 20.5X FY25E EPS, translating to an unchanged target of Rs 1,760. Despite Infosys’s cautious outlook on a few verticals, it believes its strength in managing the twin journeys of digital transformation (Cobalt) and cost takeout will drive growth leadership.

  • Nuwama: Buy | Target: Rs 1,610

“Over the medium-to-long term though, we expect Infosys to benefit from the strong demand environment,” Nuwamam said recommending a buy. It said that while there is near-term pain, long-term thesis remains intact. The target has been revised downwards from Rs 1,900 to Rs 1,610.

  • PhillipCapital: Buy | Target: Rs 1,590

PhillipCapital maintained a buy on Infosys while reducing the price target.

“We cut our FY24/25 PAT estimates by 5-6% on sharp miss in Q4. We are now forecasting dollar revenue growth of 6/11% with 21.5%/21.5% EBIT margins in FY24/25. Our bear case analysis implies PAT estimate cut of 9-10%. We now value Infosys at 22x FY25 EPS (25x earlier), 20% discount to our TCS target multiple on lower growth and margins assumptions. Price target at Rs 1,590 vs Rs 1,910 earlier,” it said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


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