Infosys Ltd. share price target

In Line Quarter & Guidance; Growth Investments & Cash Return Key Positives Infosys delivered an in-line performance in 4QFY18, with revenue rising 1.8% QoQ (0.6% QoQ in CC terms) to US$2,805mn, almost exactly in-line with our estimate. Aided by currency, lower SG&A; and offshore mix, EBIT margin rose by 46bps QoQ, while volume growth came in at 1.2% QoQ. The Management has guided for FY19E USD revenue growth at 7-9% (6-8% in CC terms), in-line with our and street expectations. However, the management guided for lower margin at 22-24%, owing to investments in business on digital, increasing localisation of US staff and reskilling employees. The wide margin band is negative, which gives room for margins to come in at the lower end of the band. FY18 EBIT margin was at 24.3%, which implies margins could fall...

INFO's FY19 guidance of 6-8% revenue growth in CC is in-line with our forecast. However, EBIT margin guidance of 22%-24% is a miss. However, we believe that INFO is making the right investments needed to drive higher growth. We believe that Mr Salil Parekh's Four-pillar strategy would enable INFO to drive...

ICICI Securities Ltd | Retail Equity Research US$ revenues grew 1.8% QoQ to $2,805 million, in line with our 1.9% growth and $2,807 million estimate. Constant currency revenues grew 0.6% QoQ vs. our estimate of 1% QoQ Rupee revenues grew 1.6% QoQ to | 18,083 crore, largely in line with our | 18,065.3 crore estimate At 24.7%, EBIT margins expanded 40 bps QoQ, above our 24.3% estimate mainly due to lower-than-expected employee expenses...

Maintain BUY with TP of Rs 1,300, 17x FY20E EPS Infosys (INFY) posted in-line revenue at USD 2,805mn, 1.8% QoQ (1.7% est.) with CC growth of 0.6%. EBIT% at 24.7%, +46bps QoQ (24.4% est.) was supported by cross currency gains (+20bps) and higher offshore mix. INFY guided for 6 to 8% YoY (CC terms) growth for FY19E vs. 5.8% registered in FY18, but lowered its EBIT% guidance to 22-24% (from 23-25%).

New CEO's focus: to scale digital, automation, reskilling and localisation New CEO plans to scale digital/agile, energise core through automation, reskill employees in clients' digital needs and boost investment in localization in US, Europe and Australia as part of its strategic roadmap for FY19. The company has lowered the operating margin guidance for FY19 to 22-24% compared to 24.3% in FY18, as it sees the need to revitalise its sales team (more feet on ground in Europe, digital specialist salespersons and account expansion program from both service lines and geographic perspective) and enhance Digital capabilities from offering/delivery perspective. Management expects growth to be back-ended and has...

Infosys (INFO) kept the hopes of a demand recovery live with an in-line 4QFY18 results/FY19 guidance. However, the unexpected lowering of the EBIT margin band to 22-24% (from the current 23-25%) was a disappointment, especially given the currency tailwinds. The reasons for reset appear to be micro increased investments in digital capability + capacity expansion to quickly develop a services-driven digital business (vs. the product/platform approach under Vishal Sikka); macro variables are stable INFO indicated minimal pricing pressures and FY19 wage inflation is similar to FY18. We expect the margin impact to be concentrated in the near-term and stabilise over FY20; INR depreciation could be an incremental support. Thus,...

Low margin guidance dents profitability; maintain SELL USD revenue grew 1.8% QoQ tad below our estimates; 0.6% QoQ in CC terms. EBIT margin remained flat QoQ at 24.2% despite negative impact of wage hike offset by operational efficiencies. INFO slashes its revenue guidance to 6%-8% (CC terms) which translates into a CAGR of 1.6%-2.3% over four quarters. The management has lowered its EBIT margin guidance in the range of 22%-24% for FY19 as compared to 23%-25% for FY18 due to investment in digital services. We upgrade our earnings estimates by 4%...

INFO's CC revenue growth guidance of 6-8% YoY was nearly in line with expectation. The marginal beat can be ascribed to a weaker exit in 4Q (0.6% CC) than our expectation (1.5% CC). This implies that the CQGR will be better if the guidance is met. We have cut our earnings by ~2% for FY19/20E, factoring in the weaker exit and the marginal profitability decline. INFO's performance in recent years has been in line with peers. The guidance on revenues was on expected lines. However, we believe that the lower end of the EBIT margin band of 22% is conservative, with pricing pressures seemingly tailing off and the share of higher-margin Digital inching up. Our price target of INR1,330 discounts forward earnings by 16x. Maintain Buy.

Infosys is trading at discount to its historical average. We believe as the management team stabilizes, with key focus on execution of strategic initiatives undertaken by the team along with continued focus on regaining market share, Infosys is in early stage of rerating cycle.

Infosys Limited (INFLTD) is the second-largest IT services company in India providing consulting and IT services to clients globally. It is also among the fastest growing IT services...