Infosys hits Rs 8 lk cr m-cap. Here's why most analysts are bullish on the stock

NEW DELHI: Shares of IT major Infosys hit a record high of Rs 1,913 on Friday and became the only second IT firm in India to cross the market value of Rs 8 lakh crore. The stock's market value was neck-to-neck with HDFC Bank, the third most valued stock on Dalal Street.

IT giant TCS enjoys a market capitalisation of over 13.5 lakh crore, while Reliance Industries tops the m-cap chart with Rs 16 lakh crore in market value.

A consensus buy, Infosys has 37 out of 42 analysts tracking the stock recommending a Buy, four others recommending Hold and just one suggesting a Sell call. But the median 12-month consensus target on the stock stands at Rs 1,977.20, which suggests only a single-digit upside potential from here on.


On Friday, the stock hit a record high of Rs 1,913 but cut most of these gains as the session progressed.

At 1.45 pm, the scrip was trading at Rs 1,859.10, up 0.12 per cent. The stock has a target as high as Rs 2,354 and as low as Rs 1,550.
The median 12-month consensus target on the stock stands at Rs 1,977.20, which suggests a single-digit upside potential from here on.

Sharekhan said Infosys is well placed to deliver industry-leading organic growth among large peers in the medium term. Margins are expected to remain under pressure due to supply-side challenges, the roll-out of wage hikes for senior employees, and weak seasonality, which will be partially offset by strong growth in the digital business, operational efficiencies, and currency tailwinds.

It expects the IT firm to report dollar revenue and earnings growth of 12.4 per cent and 15.1 per cent, respectively, over FY20-24.

At present, the stock trades at 30 times FY23 and 26 times FY24 earnings, which Sharekhan said is justified, given strong growth potential, robust deal pipelines, robust execution, and improving return on capital employed (ROCE).

"We like Infosys because of its superior digital capability, consistent investments in talents, stable management, a strong capital allocation policy, and a healthy balance sheet. Hence, we maintain our Buy rating on the stock with an unchanged price target of Rs 2,050," Sharekhan said.

Analysts noted that Accenture’s exceptionally strong results, outlook, hiring activity and management’s commentary of the accelerated pace at which clients are undergoing technology transformation, reinforces the belief that IT demand will be robust for the next 2-3 years.

"Demand is broad-based, across both digital leaders and laggards and driven by accelerated cloud migration and transformation spending, a multi-year journey for clients. Talent shortage and time to market constraints favour outsourcing. Core modernisation is a large opportunity. Infosys and TCS offer a full-service model and are best-positioned to capitalise on the opportunity," Prabhudas Lilladher said last week.