Nomura Bets on Infosys in IT Space

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Nomura Bets on Infosys in IT Space
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- Foreign brokerage firm Nomura Holdings Inc (T: 8604 ) says that Infosys Ltd (NS: INFY ) is the best bet in Indian IT at the moment. It says that it has the potential to lead the industry and has maintained a ‘buy’ on the sector but has reduced its target price on Infosys from Rs 1,620 to Rs 1,615.

Infosys share price has dropped by 6.38% from April 9 when it closed at Rs 1,441 to Rs 1,349 on April 20. Nomura’s target reflects an estimated upside of almost 20% from current levels.

This was after the company reported a 17% increase in net profit for Q4 FY21. Nomura said that the fall is because of a miss in revenues. Nomura has raised dollar revenues for Infosys and reduced EBIT margins that have resulted in a 0-2%decrease in EPS. It expects dollar revenues to grow at 13.8% CAGR and stable EBIT margins at 22.8-23.4% over FY22/23F. “We continue to value Infosys on 26x on 1-year forward EPS (up to June-23F) of Rs 62.1 to arrive at a target price of Rs 1,615 (vs 1,620 previously),” said Nomura.

Nomura also said that the buyback announced by Infosys at Rs 1,750 per share could lead to higher EPS dilution for long-term shareholders. It said that the 25% premium doesn’t incentivize the long-term shareholder as they would have to pay capital gains tax.

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