As Infosys falls within the IT sector, which was the focus of the previous analysis on TCS, all assessments include Infosys. For a concise report on this, please refer to TCS week #2. (https://www.tmotrac.in/forum/fundamental-analysis/tcs-peer-analysis)
For this week, we will now compare the market performance of these companies as there have been no significant updates within this sector during this timeframe.
INFY Since Inception:
Infosys has been publicly traded since February 1993, initially listed at Rs. 145 with an issue price of Rs. 95. Adjusting for splits and bonuses, the current market-traded share is valued at approximately Rs. 1.85 when listed. Over time, this represents a Compound Annual Growth Rate (CAGR) of 22-24% excluding dividends.
5-Year Performance:
Over the past 5 years, Infosys has distributed dividends totaling to Rs. 179.5 and engaged in share buybacks amounting to approximately Rs. 17,500 Crores. As of February 29th, 2024, the company has grown at a 5-year CAGR of 17.5% excluding dividends.
The following table illustrates the 5-year market performance of the IT sector. During this period, HCL has shown a growth of approximately 3.5 times, achieving a CAGR of 23%, while TECHM has experienced a doubling with a CAGR of 13%. (Note: Dividends are excluded from these returns.)
Furthermore, the IT sector remains actively engaged in market activities, frequently repurchasing their own shares at significant premiums or issuing bonuses, thereby enhancing the wealth of their owners. The subsequent table outlines the total value of share buybacks by each company and the frequency of these buybacks over the past 5 years, with all companies issuing bonuses except TECHM within this timeframe.
Price to Earnings:
The chart below presents the PE ratio of the pack, with closing prices as of February and trailing twelve months TTM earnings (Jan'23 to Dec'23). The current market indicates an average PE ratio between 33 to 37 times. The net income margins (NM%) reflect the respective companies' profitability as per their most recent quarterly results (for the quarter ending December 2023).
For this quarter notably, TECHM experienced a weak quarter, witnessing a 61% YoY decline in earnings to Rs. 510 Crore from Rs. 1296.6 Crores. Consequently, TECHM's net margins have dipped by less than 5%. Meanwhile, HCL has the highest margins at 26.73% during this quarter.
DateĀ - 07th Mar '24; SourceĀ - Company Annual reports, Money control, ICICI direct, HDFC sec, Web;
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