Infosys shares fall 4% after mixed Q2 result; know brokerage calls

Infosys Ltd shares dropped 4% in the early morning trade on Friday after mixed quarterly numbers in the July-September quarter of FY2024-25. Shares of India's second-biggest IT services company opened a gap down at ₹1,893.80 on the NSE and hit the day's low at ₹1,889 before settling at ₹1,910.10. At this price, Infosys shares are trading 4% lower than the 52-week high of ₹1,991.45 touched on October 15, while 29% above the one-year low of ₹1,351.65 hit on November 1, 2023. The Infosys share has surged 31.56% in the past year, while its year-to-date gains are 12.17%.

The dip in shares also comes amid a broader negative market, with benchmarks Sensex and Nifty trading in red at -0.45% and -0.35%, respectively.

Infosys delivered mixed Q2 FY25 results, which were in line with Street expectations. IT major Infosys recorded 5% year-on-year growth in its net profit at ₹6,506 crore in the second quarter (Q2 FY25) against ₹6,212 crore a year ago, thanks to a good momentum in financial services. India's second-largest IT services company recorded 5.1% YoY growth in the second quarter revenue at ₹40,986 crore.

The Infosys management raised the FY25 revenue guidance to 3.75–4.5% in CC (from 3–4%) while maintaining the EBIT margin guidance of 20–22%. They indicated seasonality and furloughs are likely to hurt Q3 revenue growth. Infosys won 21 large deals, but overall TCV was weak at $2.4 billion (-41.5% QoQ/-68.8% YoY). The net headcount turned positive for the first time in six quarters, with an addition of 2,500 employees. Management highlighted the plan to add 15–20,000 freshers in FY25. Infosys has deferred FY25 wage hikes for its employees, which will now be taken in January 2025 and April 2025.

Brokerage calls

Nivama Institutional Equities, in its commentary post Q2 results, said Infosys delivered broad-based growth with early signs of a revival in discretionary spending. The brokerage has maintained a "BUY" call on the stock with a target price of ₹2,250, which remains unchanged from its previous call. "We reckon Infosys shall benefit disproportionately in FY26/27—from a revival in discretionary spends—just like it suffered disproportionately (versus peers) in FY24/25. We view it as one of the best ways to play the revival in the IT sector over the next few years; retain ‘BUY’. The brokerage says while revenue growth was decent, margins and TCV left much to be desired. "We are cutting FY25E/26E EPS by -4.5%/-1.9%, mainly due to higher tax in FY25. We continue to value Infosys at 28x Sep-26E PE."

Motilal Oswal has also given a "BUY" call on the stock, with a target price of ₹2,200, while marginally adjusting its FY25 and FY26 estimates for the company. The brokerage in its commentary Infosys will benefit from an IT spending boost in the medium term.

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