Infosys Ltd: All-Round Beat; FY22 Revenue Growth Guidance Raised

 BUY

CMP: Rs1877 

Target Price: Rs2160

* Q3FY22 revenues beat our expectations, while the margin was in line. Revenues grew 6.3% QoQ (7% CC) to USD4.25bn. EBITM declined 10bps QoQ to 23.5% due to salary hikes and other employee interventions, negated by cost optimization.

* Infosys has raised its FY22 revenue growth guidance to 19.5-20% CC (earlier 16.5-17.5%), implying 0.5-2% QoQ growth in Q4. Infosys remains confident of sustaining growth momentum on the back of broad-based demand, solid deal intake and a healthy deal pipeline. The company has retained its EBITM guidance at 22-24%.

* The intake of large deals was healthy at USD2.5bn in Q3FY22 (43% new), with 25 large deals signed during the quarter. The deal pipeline remains healthy with a good mix of new and renewal deals, offering good revenue visibility.

* We increase earnings estimates by 1.3%/1.5%/2.5% for FY22/FY23/FY24, factoring in the Q3 beat. We maintain Buy with a revised TP of Rs2,160 (earlier Rs 2,100) at 30x Dec'23E EPS, considering strong earnings momentum and a robust demand environment.