Infosys (NS:INFY) announced a robust performance for Q4 FY24, with a net profit of INR 7,975 crore, marking a significant 30% YoY increase. Despite challenges, the company reported a 1.3% YoY growth in revenue, reaching INR 37,923 crore.
However, revenues in constant currency terms remained stagnant YoY and dipped by 2.2% QoQ. Looking ahead, Infosys anticipates a steady revenue growth of 1-3% in constant currency for FY25, coupled with an operating margin of 20-22%, reflecting confidence in its operational efficiency amidst evolving market dynamics.
Goldman Sachs (NYSE:GS) analysis suggests that Infosys's 4Q results could mark a turning point, potentially ending negative surprises. The company's guidance for FY25 indicates modest growth, supported by deal ramp-ups and a favorable spending outlook. Historically, Infosys often revises revenue guidance upwards throughout the year, a trend expected to continue. Despite recent declines, Infosys's valuations remain discounted relative to the sector, expected to narrow as discretionary spending rebounds.
Goldman Sachs maintains a Buy rating with a 16% upside, highlighting Infosys's resilience but lowered the 12m target price by 4% to INR 1,650 (US$19.8 for ADR). However, they caution a negative read-across for companies like Wipro (NS:WIPR) and LTIM, particularly those reliant on discretionary revenues. Infosys's note on tight budgets in the Communications sector could also impact companies like TechM, suggesting broader implications within the sector.
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Looking at the true intrinsic value of the stock, InvestingPro’s fair value suggests an upside potential of 5.8% to INR 1,471. This is a bit lower than what Goldman eyes, but the trajectory of the stock seems firmly on the upside due to the valuation gap.
In fact, all analysts covering this counter have given an average upside target of INR 1,649, which is almost exactly the same as Goldman’s target. This analyst coverage section is an important feature that lets retail investors get a view of what astute investors on the street are thinking about the counter.
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