Infosys shares fell almost 2 percent in the morning trade on BSE on March 2 in a weak market.
The stock has been under pressure in the last one year on concerns over a slowdown in the key markets in the US and Europe.
The stock hit a 52-week high of ₹1,924 on BSE almost a year ago on March 17, 2022. At present, it is down over 22 percent from its 52-week high level.
As MintGenie reported earlier, Infosys posted a 20.2 percent year-on-year increase in consolidated revenue for the December quarter at ₹38,318 crore, and surprised many by hiking full-year revenue guidance to 16-16.5 percent.
Infosys' consolidated net profit rose to ₹6,586 crore during October-December 2022 as against ₹5,809 crore a year back, translating into 13.4 percent increase. Sequentially, the net profit was 9.4 percent higher than the September quarter.
The company raised its annual sales forecast on a strong deal pipeline, but in the same breath, it warned of "constraints" in certain verticals amid a slowing global economy.
Infosys called out mortgage, investment banking, telecom and hi-tech, saying these segments were "more impacted, leading to delays in decision-making and uncertainty in spending."
The company was, however, quick to add that sectors like energy, utilities and manufacturing continue to see traction.
Moreover, the concerns are more pronounced in Europe than the US, the Bengaluru-based IT bellwether said.
"We see in the European markets, more concerns on what's going on with the economy... and the US market is also there, but relatively less so in the US with respect to Europe. We will see how this plays out," Infosys CEO Salil Parekh said during the Q3 results conference.
Global 5G expertise to be a boon for Infosys
Brokerage firm BOB Capital Markets (BOBCAPS) - a wholly owned subsidiary of Bank of Baroda - is bullish on Infosys.
The brokerage firm believes Infosys is well-placed to leverage its global 5G expertise to deliver reliable, secure, and cost-effective private 5G-as-a-Service.
BOBCAPS has a buy call on the Infosys stock with a target price of ₹1,760, which is a nearly 18 percent upside from the stock's March 1 closing of ₹1,496.65 on BSE.
Underscoring the significance of 5G technology, BOBCAPS said private 5G is a boon for high-bandwidth enterprises. Since its demand is growing, Infosys is capable of tapping it.
"The rollout of private 5G-as-a-Service incorporates multi-access edge computing (MEC), which reduces network lag by minimising the time required for data processing. This enables highly reliable network operations for high-bandwidth enterprise use-cases such as remote-guided vehicles, drone-based real-time analytics, high-definition media and video analytics, metaverse solutions, and a variety of Internet of Things (IoT)/Industrial IoT (IIoT) applications," said BOBCAPS.
BOBCAPS highlighted that the global private 5G market may grow at nearly 50 percent over 2022-30.
"According to NTT/Grand View Research, the global private 5G network market was valued at $1.5bn in 2022 and is likely to expand at a 49 percent CAGR over 2022-30, fuelled by the growing need for ultra-reliable low-latency connectivity for IIoT applications, including collaborative robots, industrial cameras, and industrial sensors," sid BOBCAPS.
"As per industry estimates, the market for private 5G services in India is likely to be in the region of $570mn by 2026. Various reports suggest that the software expense will increase materially as compared to hardware and services over the next decade," said the brokerage firm.
BOBCAPS said Infosys’s collaboration with its partner ecosystem offers reduced time-to-market and a lower total cost of ownership for private 5G rollout to clients.
"Enterprises see private 5G as an enabler for their digital transformation, wherein Infosys offers vertically aligned pre-integrated business solutions that target faster value realisation for customers. We believe the company is well placed to leverage its global 5G expertise to deliver reliable, secure, and cost-effective private 5G-as-a-Service, using an agile delivery approach," said BOBCAPS.
As per the estimates of the brokerage firm, Infosys stock is trading at 20.7 times and 17.6 times FY24E and FY25E earnings per share (EPS), respectively.
"Despite Infosys' cautious outlook on a few verticals, we believe its strength in managing the twin journeys of digital transformation (Cobalt) and cost takeout will drive growth leadership. We retain a 'buy' and continue to value the stock at 20.5 times FY25E EPS, translating to an unchanged target price of ₹1,760," said BOBCAPS.
According to a MintGenie poll, an average of 42 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.