Earnings and valuation upgrade likely for Infosys: Mitul Shah

“Even vertical wise, the segment where people are more concerned about the manufacturing and energy sectors. Among all these segments, manufacturing reported a 45% growth, energy reported 25% growth. Whatever the factors were worrying people till now for the IT sector seems to be fading away and for Infosys at least, it is giving a very strong positive,” says Mitul Shah, Head of Research, Reliance Securities

What is your first take on Infosys results? Of course, the margin figure is looking quite interesting but in terms of the TCV at $2.7 billion plus, attrition coming off and headcount addition also looking strong, what is your take?
It is an all around beat. There is outperformance across the parameters – be it margin, increasing the guidance on the revenue side, narrowing down the guidance and also maintaining lower end of margin territory.


Certainly the deal win is a very big positive surprise even in the last four-five quarters. It is coming to $2.7 billion. Last quarter, it was $1.7 billion, So, this is definitely increasing or strengthening our positive view and increasing confidence that going forward, the company’s revenue run rate would be definitely in healthy double digit YoY growth even in FY24 onwards.

What is your expectation in terms of upgrades coming in for Infosys? Would the number warrant an upgrade tomorrow?
Certainly numbers will warrant the upgrade as the guidance has increased and margins for the second quarter came as a bit of surprise. Even if the company is maintaining margin guidance, there is a high probability that going forward in the second half as this wage hike will stabilise and pricing power coming back to this company margin would give positive surprise.

Even if we look at it in terms of the geography-wise details, Europe's performance is similar to HCL’s results, Europe has outgrown America, the region where everyone is more sceptical or worried about the slowdown. That region has reported 29% YoY CC growth compared to North America with 16% growth.

Even vertical wise, the segment where people are more concerned about the manufacturing and energy sectors. Among all these segments, manufacturing reported a 45% growth, energy reported 25% growth. Whatever the factors were worrying people till now for the IT sector seems to be fading away and for Infosys at least, it is giving a very strong positive. So, definitely there would be an upgrade on the revenue side as well as on the margin side. Earning upgrade is very much likely and certainly valuation also.