Buy Infosys; target of Rs 1300: Motilal Oswal

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Guidance cut: Infosys lowered its FY27 revenue growth guidance to 1-2% YoY in CC, citing softer volumes and lower-than-expected price increases.
  • Deal wins: The company reported large deal TCV of USD5.2b, with 62% net new deals, including a USD2b+ mega deal expected to contribute over 1% to FY28 growth.
  • AI revenue growth: AI-first revenue rose to 10.5% of total revenue, up 29% QoQ, with management expecting AI growth to offset legacy deflation.
  • Margin performance: Adjusted EBIT margin was 21%, in line with estimates, with the company maintaining its EBIT margin guidance of 20-22%.

Thesis Validation Checklist

  • Revenue growth: Watch for QoQ revenue growth in the next two quarters, with a focus on organic growth and the impact of the mega deal.
  • Margin performance: Monitor adjusted EBIT margin performance, considering the impact of wage hikes, acquisition amortization, and softer seasonality.
  • Deal pipeline: Track the company's deal pipeline, including the ramp-up of the USD2b mega deal, to assess its impact on FY28 growth.
  • AI revenue growth: Follow the growth of AI-first revenue, as management expects it to offset legacy deflation and contribute to overall revenue growth.