Categories Analysis, Research Summary, Research Tear sheet

Infosys Limited Research Report

Stock Data

Ticker: INFY

Exchange :NSE and BSE

Industry: INDUSTRY- IT Consulting & Software

Price Performance

Last 7 days    4.41%

YTD                 -14.22%

Last 12 months     -1.87%

The IT stocks are falling mainly due to supply-side pressures, decline in profits, revenue and high attrition rates. According to Jefferies, Infosys is well positioned and expected to deliver revenue CAGR of 11% from FY22-23 to FY24-25.

Company Background & History- Infosys Limited is an Indian multinational company. It deals with information technology, Consulting and Outsourcing. The company is headquartered in Bangalore, Karnataka in India. The company was incorporated on 2 July 1981. It has its operations worldwide. Infosys has its major presence in India, United States, China, Australia, Japan, Middle East and Europe. The company started its journey with  a capital of US$250, and today it is a US$ 77.88 billion company. It is the first  IT Company from India to be listed on NASDAQ. Employee count stood at 335K with 39.3% women. It is listed on BSE, NSE and NYSE.

Annual Revenue by geography

Shareholding Pattern

Services- The main services include Application Development & Maintenance, Business Process Management, Consulting Services, Incubating Emerging offerings.

Industries- The main industries served by Infosys include Aerospace & Defence, Agriculture, Agriculture, Automotive, Heathcare, Insurance, Logistics, Media & Entertainment, Mining, Oil & Gas, Travel &Hospitality, Utilities, Waste Management, Financial Services, Education, Communication Services & Chemical Manufacturing.

Key Financial Highlights- Revenues in CC terms increased  by 21.4% YoY and 5.5% QoQ. Reported revenues increased by 23.6% YoY  toRs34,470 crore. Operating margin stood  at 20.1%, declined 3.6% YoY and 1.4% QoQ. Basic EPS grew  4.4% YoY to Rs 12.78.

Business Outlook

EPS TrendCurrent Qtr. (Sep 2022)Next Qtr. (Dec 2022)Current Year (2023)Next Year (2024)
Current Estimate0.180.190.740.85

The company anticipates revenue to be in the range of 14% to 16% for the full year, EBITDA margin guidance at 21% to 23%.

Peer Analysis

Company NameMCap(Cr)TTM PEP/BROE(%)
HCL Tech2,62,153.6219.314.2321.8
Tech Mahindra1,02,783.1319.234.0420.7

On the basis of investor perspective, TCS is in a better position with respect to Market Cap and ROE followed by Infosys.

Industry Analysis- The Indian IT and consulting industry is expected to reach US$ 100 billion by 2025. The companies are constantly investing internationally to expand global footprint and enhance their global delivery centres. It is also expected that since there is a huge demand for AI the market is expected to reach US$ 7 billion by 2030.

IT Industry is the backbone of the Indian Economy. Today we cannot think of any industry without IT. It has helped to grab the international market and this would improve the socio-economic status of Indians. To develop this IT sector the government has taken several measures. It has set up Software Technology Parks (STP), Export Oriented Units (EOU), Special Economic Zones (SEZ) and foreign direct investment (FDI).Though COVID-19 has impacted the economy as a whole but IT industry introduced the concept of digitization which helps to expand the demand in the digital economy. It successfully integrated  fifth-generation (5G) communication technology, artificial intelligence, Big Data analytics, cloud computing and the Internet of Things (IoT).

If we analyse the IT industry we can see Opportunity-wise, the IT sector is growing. But on the other hand there is a huge shortage of talented employees. The employees have multiple job opportunities. So in the IT sector the attrition rate is very high.

Strength-It has a strong brand name in the market. It has a strong global presence. Infosys enjoys cost benefit due to its presence in India. Provides diversified product mix options to its customers. It has entered into strategic partnershipswith other technological companiesto  deliver a collaborative service.The financial figures depict that the company has a huge ROI which has helped in business expansion.

Weaknesses- Revenue is solely dependent on North America and Europe.High attrition rate of employees.Rising wage inflation affecting the India market.

Opportunity-  The company should focus more on cloud based computing.Infosys should focus on emerging markets for further growth. It should concentrate on digital transformation services which can benefit in increasing global investment. In can even expand technology by investing in  technology start-up companies.

Threat- Change in government policies in the USA.Prevailing immigration law  also impacting the IT indusry. Huge competition from other IT firms.Infosys is greatly affected due to volatility in the market. Infosys is exposed to various liability claims due to liability laws prevailing in different countries.

Key Developments

Strategic Deals-Infosys  has entered in a  partnership with Rolls-Royce to launch ‘Aerospace Engineering and Digital Innovation Centre’ in Bengaluru. Infosys launched Cobalt Financial Services Cloud, an industry cloud platform for enterprises across the financial services industry to accelerate business value in the cloud.It has also entered into a strategic deal with Google Cloud to deliver seamless and secure digital experiences for outdoor enthusiasts. Infosys along with TK Elevator will revamp their digital workplace management, network security, and IT infrastructure. It is to be powered by Infosys Cobalt.

Achievements- Infosys has been recognized among Kantar’s global 100 most valuable brands in 2022. It has ranked highest in Stakeholders Empowerment Services. It has been recognized as the Global AI Services Company of the Year’ by Frost & Sullivan. Infosys BPM announced as a winner in the Telecommunications at the Global Sourcing Association (GSA) UK Awards 2022. It has been recognized as one of the World’s Most Ethical Companies in 2022 by Ethisphere Institute. Ranked 1st in   CRISIL Sustainability Yearbook, 2022. It has been recognized as the Global Top Employer for the 2nd consecutive year .

ESG Initiative- The company is targeting to achieve Zero waste to landfill. It introduced 100% wastewater recycling. It created gender-diverse workforce with 45% women. It target to extend digital skills to 10million by 2025. The company has Employees from 158 Nationalities, out of which 39.3% are  Women employees and 25% Women Board members.

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