Infosys Surges 5% on Buyback Announcement, Revision in FY23 Guidance; Should you Invest?

Infosys Share Price Today: Infosys shares climbed 5 per cent in Friday’s session after the IT firm came out with a healthy set of September quarter results. The second-largest software exporter increased its lower ends of the FY23 revenue and margin forecasts and okayed a Rs 9,300 crore in share buyback, impressing Dalal Street investors. The company’s revenue jumped 23.4 per cent to Rs 36,538 crore, against Rs 29,602 crore in the September 2021 quarter. Sequentially, Infosys’ net profit jumped 12.3 per cent as compared with Rs 5,360 crore in the June 2022 quarter.

On a quarter-on-quarter basis, its revenue rose 6 per cent during July-September 2022 as against Rs 34,470 crore in the preceding quarter, according to a BSE filing. In dollar terms, Infosys’ revenue jumped 13.9 per cent to $4,555 million in the September 2022 quarter, compared with $3,998 million a year ago.

Infosys on Thursday also declared an interim dividend of Rs 16.5 per equity share. It has fixed October 28 as the record date for the interim dividend and November 10 as the payout date.

The company on Thursday also announced a share buyback of Rs 9,300 crore. “The board approved a proposal for the company to buyback its own fully paid-up equity shares of face value of Rs 5 each from the equity shareholders of the Company (other than the promoters, the promoters group and persons in control of the Company), being 14.84 per cent and 13.31 per cent of its total paid-up capital and free reserves as on September 30, 2022 (on a standalone and consolidated basis, respectively) for an amount, payable in cash, aggregating up to Rs 9,300 crore,” Infosys said.

Should you Invest in Infosys?

“Infsoys’ Q2 results were above estimates driven by margin expansion. Deal wins at a seven-quarter high and healthy hiring trends offer comfort on growth. Infosys’ strong deal bookings and consistent execution provide comfort amidst an uncertain macro. While valuations at 23x are still at a premium to 10-year average levels of 19x, we believe it is justified given the superior growth outlook,” said global brokerage Jefferies while maintaining Buy rating on Infosys shares with a target price of Rs 1,710 apiece.

Mitul Shah, Head of Research at Reliance Securities said Infosys numbers were strong and that margin beat his estimates. He said the management raising FY23 revenue growth guidance range from 14-16 per cent to 15-16 per cent and revising its EBIT margin guidance to 21-22 per cent from 21-23 per cent earlier, are indicating better performance for the IT major in the rest of FY23.

“Considering the industry-leading double-digit revenue growth, rising share of digital business (61 per cent of revenue), likely improvement in EBIT margin levels from current levels, declining attrition rate and record-high new TCV, we maintain our BUY recommendation on the stock,” he said.

Sharekhan said Infosys raising the lower-end of revenue guidance was a positive surprise, given the volatile macro environment. It said the share buyback of Rs 9,300 crore was on the expected lines, at 30 per cent premium.

“We believe, Infosys’s decent Q2 numbers coupled with management comforting demand commentary and margin sustenance despite supply-side challenges, allay investor fears in this uncertain global environment, further Buyback would support the stock performance in near term amid market volatility. We have a BUY rating on the stock,” it said.

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