[ad_1]
Infosys (NS:): Infosys (INFO) posted in-line revenue performance and a beat on margins in Q2FY23. Revenue growth of 4% QoQ and 18.8% YoY CC and strong large deal bookings of USD 2.7bn led to a change in revenue guidance to 15-16% CC for FY23E (vs. 14-16% guided earlier). Key positives in INFO’s Q2 were (1) net-new large deal bookings for Q2 at USD 1.4bn (H1FY23 net-new large deal bookings up 47% YoY) driving growth visibility for H2; (2) digital at 61.8% of revenue growing 31% YoY CC (although sequential deceleration), including Q2 cloud revenue at USD 1bn+; (3) positive commentary on deal pipeline (higher than last two quarters) reflecting deal funnel replenishment despite prevalent macro; (4) net headcount addition of 10k or ~3% in Q2 with 40k fresher addition in H1 and the company expected to surpass annual fresher intake plan; and (5) operational improvement led by sub-contracting optimization and better large contract profitability (improvement in manufacturing vertical margin) increasing the certainty to hit 21%+ EBITM for FY23E with added levers (utilization, rate card in digital). Nonetheless, management cautioned on select verticals (communication & hi-Tech, mortgage, and retail sub-segment) citing instances of the slower decision cycle. Maintain BUY on INFO (top pick in tier-1 IT), with a TP of INR 1,790, based on 26x June-24E EPS.
Mindtree (NS:): Mindtree (MTCL) posted strong revenue and margin performance in Q2FY23; revenue was up 5.7% QoQ and 20.6% YoY. Key positives for MTCL included (1) strong deal bookings of USD 518mn in Q2 (second-highest ever quarterly TCV, following the highest-ever in a seasonally strong Q1) and USD 1bn+ in H1FY23 providing growth visibility; (2) growth consistency of 5%+ with robust growth across verticals (ex-retail), service-lines (including customer success service-line) and in T1 account; and (3) EBITDAM resilience supporting 27% YoY growth in EPS in Q2. Near-term growth moderation is expected to be impacted by furlough in Q3 as well as integration with LTI. Growth drivers of synergies are on the anvil as the merger with LTI is expected to be completed in Q3FY23E. Maintain BUY on MTCL, with a TP of INR 3,800, valuing the stock at 28x Jun-24E EPS.
Cyient (NS:): Cyient reported a decent quarter; revenue was up 10% QoQ CC (in line with estimate), led by core services (+12.3% QoQ CC, +3% organic). The services growth was driven by the aerospace vertical and new growth areas like automotive and mobility. Investments in new areas (EV and mobility) will help the company align its growth with the industry. Aerospace will continue to deliver growth and communication will revive, led by 5G network rollout. Transportation (railways) and utilities continue to drag growth and some respite is likely in H2. The company has announced restructuring/demerger of the DLM business, which we believe is a positive step. The deal wins remain strong for the DLM business and a total TCV of USD 105mn indicates a positive momentum. Management guidance of 13-15% YoY CC organic growth and EBIT margin of 13-14% appear encouraging. The margin expanded 40bps QoQ, led by a better margin in services and DLM. We increase our FY24E EPS estimate by ~1.2% and maintain our BUY rating. Our target price of INR 935 is based on 16x June-24E EPS. The stock is trading at 16/14x FY23/24E, a steep discount of ~50% to ER&D peers (LTTS).
Click on the PDF to read the full report:
[ad_2]
Source link
(This article is generated through the syndicated feed sources, Financetin doesn’t own any part of this article)
