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Infosys Ltd INFY

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Morningstar’s Analysis

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Infosys’ Fourth Quarter Marked by Strong Digitization Demand; Increasing FVE to $11.20 (INR 840)

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

Infosys’ fourth quarter was marked by broad-based improvement, with growth in all verticals--which we think is a feat considering verticals like retail remain suppressed due to the global pandemic. Like TCS, the company saw enterprises loosen their wallets on digital transformation projects, of which many were put on hold at the start of the global pandemic. Infosys’ earnings per share came right in line with our expectations as record high utilization and offshore mix led to robust margins. We are increasing our fair value estimate for narrow-moat Infosys to $11.20 (INR 840) per share from $9.80 (INR 720) per share as a result of the time value of money and an even stronger fiscal 2022 than we previously projected. We think Infosys will benefit from a significant top-line rebound this year due to a condensed restart to digitization projects and enterprises’ accelerated realization of the importance of digital transformation--as COVID-19 served as an IT wake up call. Shares are trading near $17.50 (INR 1,400) upon results, leaving the stock in 1-star territory. As a reminder, we assign Infosys a high uncertainty rating due to the risk of Indian wage inflation, which narrows the market price range around when we consider this company is fairly valued. 

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Company Profile

Business Description

Infosys is a leading global IT services provider, with nearly 250,000 employees. Based in Bangalore, the Indian IT services firm leverages its offshore outsourcing model to derive 60% of its revenue from North America. The company offers traditional IT services offerings: consulting, managed services and cloud infrastructure services, and business process outsourcing as a service (BPaaS).

Hosur Road, Electronics City
Bengaluru, 560 100, India
T +91 8028520261
Sector Technology
Industry Information Technology Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Mar 31, 2021
Stock Type
Employees 242,371