14 January 2021 HSIE Results Daily

Infosys
Growth certainty on explosive deal wins
BUY
We maintain BUY on Infosys (INFY), following a strong 3Q print (best 3Q in 8 CMP (as on 13 Jan 2021) Rs 1,387
years) and the highest-ever deal wins translating into growth leadership in Target Price Rs 1,580
tier-1 IT. TCV of large deal wins (including largest-ever Daimler deal) stood at
NIFTY 14,565
USD 7.1bn (net new TCV at USD 5.2bn). Growth in 3Q was led by NorthAm-
BFSI (Vanguard ramp-up), E&U, Life sciences vertical and NorthAm- KEY
OLD NEW
Manufacturing/Communications. INFY scores high on growth visibility based CHANGES
on a staggering 3.5x growth in 9MFY21 net-new large deal TCV over the prior Rating BUY BUY
period. Growth ahead is predicated on (1) strong momentum in BFSI (8 large Price Target Rs 1,400 Rs 1,580
deal wins), (2) 4-4-3 large deal wins in Manufacturing, Communications, E&U
FY21E FY22E
verticals, (3) consolidation opportunities and continued growth in digital, EPS %
driven by improving competitive advantage led by Infosys Cobalt and strong +0.2 +7.4
supply-side metrics (80% of digital fulfilment over past 3 years via re-
skilling). Our target price is Rs 1,580 at 25x Dec-22E (~10% discount to TCS KEY STOCK DATA
and 24x earlier), supported by 20% EPS CAGR over FY21-23E. Bloomberg code INFY IN
 3QFY21 highlights: (1) INFY delivered its best sequential growth in the past
No. of Shares (mn) 4,260
eight years at 5.3% QoQ CC (6.6% YoY CC). (2) EBIT margin stood at 25.4%,
remained flat (+7bps QoQ), supported by operating levers of higher MCap (Rs bn) / ($ mn) 5,911/80,756

utilisation & offshore mix (+100bps), FX tailwind (+20bps), offset by 6m avg traded value (Rs mn) 12,691
transition & re-badging (-50bps), employee promotion (-20bps) and higher 52 Week high / low Rs 1,393/509
sub-con cost (-50bps). (3) Wage increase effective 4QFY21 will impact
margins. (4) Out of the 22 large deals wins, 8 were in BFSI, 4 in
STOCK PERFORMANCE (%)
Manufacturing, 4 in E&U, 3 in Communication and 1 each in Retail/Hi-
tech/Other vertical. By region, 13 deal in US, 7 in EU and 2 in ROW. (5) 3M 6M 12M

Utilisation stood at an all-time high of 86.3% and management is targeting Absolute (%) 19.9 74.1 79.4
82-85%. Relative (%) (2.0) 39.2 61.2
 Outlook: INFY’s growth leadership is backed by large deal wins which is
key positive for revenue visibility in the near term. We have factored in USD SHAREHOLDING PATTERN (%)
revenue growth of 7%, 16.1%, 12.9% for FY21/22/23E with 4QFY21 at 3.5%
Sep-20 Dec-20
QoQ. EBIT margin factored in at 23.9% for 4Q and 24.1/24.5% for FY22/23E.
Valuations are at 24.8/21.2x (~14% discount to TCS) with FY21-23E EPS Promoters 12.95 12.95
CAGR at 20%. FIs & Local MFs 24.96 23.75
Quarterly financial summary FPIs 31.31 32.26
3Q 3Q YoY 2Q QoQ
YE March (Rs bn) FY19 FY20 FY21E FY22E FY23E
FY21 FY20 (%) FY21 (%) Public & Others 30.78 31.04
Revenue (USD mn) 3,516 3,243 8.4 3,312 6.2 11,799 12,774 13,669 15,876 17,931
Pledged Shares 0.00 0.00
Net Revenue 259.27 230.92 12.3 245.70 5.5 826.76 907.91 1,010.98 1,198.86 1,389.64
EBIT 65.89 50.64 30.1 62.28 5.8 188.79 193.74 246.32 289.20 340.42 Source : BSE
APAT 51.97 42.72 21.6 48.45 7.3 157.73 164.04 192.18 238.19 277.66 Pledged shares as % of total shares
Diluted EPS (Rs) 12.2 10.1 21.5 11.4 7.2 37.1 38.6 45.2 56.0 65.3
P/E (x) 37.3 35.9 30.7 24.8 21.2 Apurva Prasad
EV / EBITDA (x) 26.7 25.2 19.9 16.9 14.2 apurva.prasad@hdfcsec.com
RoE (%) 24.3 25.2 27.8 30.8 31.9 +91-22-6171-7327
Source: Company, HSIE Research, Consolidated Financials
Change in Estimates Amit Chandra
FY21E FY21E Change FY22E FY22E Change FY23E FY23E Change amit.chandra@hdfcsec.com
YE March (Rs bn)
Old Revised % Old Revised % Old Revised %
Revenue (USD mn) 13,520 13,669 1.1 15,385 15,876 3.2 17,299 17,931 3.7
+91-22-6171-7345
Revenue 1001.43 1010.98 1.0 1161.78 1198.86 3.2 1340.66 1389.64 3.7
EBIT 241.75 246.32 1.9 271.40 289.20 6.6 317.01 340.42 7.4 Vinesh Vala
EBIT margin (%) 24.1 24.4 22bps 23.4 24.1 76bps 23.6 24.5 85bps vinesh.vala@hdfcsec.com
APAT 191.82 192.18 0.2 221.63 238.19 7.5 255.88 277.66 8.5 +91-22-6171-7332
EPS (Rs) 45.2 45.2 0.2 52.2 56.0 7.4 60.2 65.3 8.5
Source: Company, HSIE Research

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