Buy Infosys; target of Rs 1300: Emkay Global Financial

Emkay Global Financial' research report on Infosys Infosys reported a weak operating performance in 2Q, with revenue and margin missing estimates. Revenue grew 1.2% CC qoq, with ~0.4% contribution from M&A. EBITM declined by 10bps qoq to 21%. The slowdown in revenue was led by softer volumes, lower-than-anticipated price increases amid competitive intensity, and slower discretionary spending in Retail/Hi-Tech verticals. 2Q large-deal TCV came in strong, at $5.2bn (62% net new), supported by two mega deals in financial services of >$2bn (7Y, net-new) and $1bn (renewal), respectively, with the former expected to contribute >1% growth in FY28. AI revenue grew 29% sequentially and contributed 10.5% to revenue in 2Q. Management has revised its FY27 revenue growth guidance to 1-2% CC (from 1.5-3.0% earlier), implying CQGR of -1.0% to +0.3% over 3Q-4Q, citing softer 1H and selective discretionary spends, particularly in Hi-tech and Retail. Wage hikes (in two phases in 3Q and 4Q), softer revenue seasonality, AI-driven productivity pass-throughs, and ramp-up of large deals should weigh on margins in 2H, partly offset by Project Maximus. Management retains 20-22% EBITM guidance for FY27. It views AI-led deflation of the legacy book as finite and AI growth as secular. Outlook We cut FY27-29E EPS by 0.8-1.5%, factoring in the 2Q miss and guidance cut. Considering undemanding valuation, we retain BUY with an unchanged TP of Rs1,300, at 16x Sep-28E EPS. For all recommendations report, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. Infosys - 2610026 - emkay