Strong Q2 earnings, Rs 9,300-crore share buyback propel Infosys stock

Shares of Infosys jumped nearly 4 per cent on Friday after the company’s September quarter earnings for the 2022-23 financial year (Q2FY23) surpassed expectations. Improvement in margins and positive guidance prompted analysts to raise target price (TP) for the stock, even as the company’s revenue growth missed estimates.

Sentiment was also boosted by the Rs 9,300-crore share buyback announcement. On Thursday, Infosys had said that it will buyback shares worth Rs 9,300 crore ($1.15 billion) at a price not exceeding Rs 1,850 per share. The buyback price is 25 per cent higher than its last close of Rs 1,477.

“We modestly change our FY23-24F EPS (earnings per share) by 0-2 per cent to factor in slightly better ebit (earnings before interest and tax) margin. We raise our TP by Rs 2% to Rs 1,640 (16 per cent implied upside; set at an unchanged 23x FY24F EPS) and maintain it as our top pick in the large-cap Indian IT services space. We expect Infy’s growth outperformance over TCS to continue in FY23-24F. The stock trades at Rs 20x FY24F EPS,” said a note by Nomura.

Market players said buyback will support the stock price in the interim. The latest buyback will be Infosys’ fourth since 2017.