Broker’s call: Infosys (Add)

Target: ₹2,010

CMP: ₹1,899.35

We expect Infosys to outperform its peers in Q2-FY25 growth, with an upside risk to its 3-4 per cent FY25 guidance (our estimates are slightly above the upper range). Positive markers include improved demand in segments of BFSI, market-share gains in deals (notably within the communications vertical), deal pipeline replenishment, and better hiring trends.

The enterprise revenue growth trajectory shows a mild improvement, which may bolster recovery in discretionary spending. Even if quarterly new large deal bookings moderate to under $2 billion, we anticipate growth acceleration driven by the increasing contribution from sub-$50 million deals.

We recently connected with the company, and some key highlights: Discretionary spending is picking up in the cards & payments, capital markets and mortgage sub-segments within the BFSI vertical; macro-led certainty has improved, with the deal pipeline and replenishment remaining strong; the communications vertical is expected to perform better in FY25, supported by several large deals, including wins in Q2 with Proximus/TDC.

Our revenue growth estimates for FY24-assume a similar incremental annual growth rate as the last five years’ average. The recent re-rating of valuation multiples has ‘partially’ priced in these positives.