Infosys stock jumps 5% post Q2 results

Shares of Infosys rallied 5% in early trade on Friday, a day after the country’s second-largest software exporter reported decent earnings for the September quarter and announced an interim dividend of ₹16.50 apiece. The board of the IT major also approved the buyback of 5.02 crore equity shares of a face value of ₹5 at ₹1,850 per share for about ₹9,300 crore.

Reacting to the Q2 numbers, Infosys share price opened 4.8% higher at ₹1,487.70, against the previous closing price of ₹1,419.75 on the BSE. During the session so far, the IT heavyweight gained as much as 4.95% to ₹1,490 apiece, with 3.4 lakh shares changing hands over the counter as compared to the two-week average volume of 8.38 lakh stocks.

Infosys' shares trade 23.7% lower than its 52-week high of ₹1,953.70 touched on January 17, 2022. The largecap stock trades ₹1,355.50 lower than its 52-week low of September 26, 2021. The market capitalisation stood at ₹6,25,872 crore.

The stock has delivered a negative return of 13% to its shareholders in one year, while it has fallen 21% in the calendar year 2022 (year-to-date basis). It has risen 5% in the last six months and 1% in a month.

For the July-September quarter, Infosys recorded an 11% year-on-year rise in its net profit at ₹6,021 crore, led by digital and cloud services. The company's consolidated revenue grew 23.4% YoY to ₹36,538 crore during the quarter under review. The board also declared an interim dividend of ₹16.50 per share vs the FY22 interim dividend of ₹15. The total amount of the interim dividend payout will be around ₹6,940 crore.

Infosys has revised its FY23 revenue guidance to 15%-16% from 14-16% earlier on concerns around the macroeconomic outlook. The operating margin guidance has also been revised to 21%-22% from 21-23% earlier.

“Management revised the lower end of revenue guidance band upwards to 15-16% YoY CC vs 14-16% earlier driven by strong performance in H1FY23 (20.1% YoY CC) and strong bookings. Guidance factors in slowing demand in certain verticals and seasonal weakness historically experienced by Infy in H2 mainly due to furloughs and lower working days,” ICICI Securities said in a report.

The brokerage has upgraded Infosys to “ADD”, from “HOLD”, saying that the company will benefit from cost-takeout deals and deliver industry-leading growth. The improvement in margins and favourable valuations also augur well for the company.

On share buyback, the brokerage said that Infosys has a payout policy to return 75% of its FCF (free cashflow) over 5 years (FY20-FY24E) to shareholders. Assuming a 75% payout over the cumulative FCF of ₹50,600 crore over FY23E-FY24E, the dividend plus buyback amount is expected to be ₹19,000 crore per year, the report noted.