Infosys Ltd. share price target

13 January 2020 The continued strength in large deal wins despite a cautious environment and the revenue growth guidance upgrade have meaningful undertones. It indicates business as usual at Infosys (INFO) despite the whistleblower- related distractions. There were neither any negative client repercussions nor has the time taken for large deal sign-offs increased due to this episode. We upgrade our EPS estimate for FY20-22 by 2%-3%, given the robust large deal wins and the decent outlook. Reiterating Buy. Revenue grew 9.5% YoY (CC) to USD 3.2b, in line with our estimate. EBIT increased 3% YoY to ~INR52b, a marginal miss. PAT was up 23% YoY to ~INR45b, a marginal beat aided by a one-off (interest income on tax refund). Key verticals BFSI (1.6% YoY, CC, Organic) and Retail (2.5% YoY, CC) remained soft. Barring these, growth in most verticals was strong. The Americas reported strong growth (10% YoY, CC), while Europe remained weak (4.

Deal wins, digital growth to lead to healthy growth Marginally below than expectations on operational front mainly due to higher decline in core business Infosys reported a 1% QoQ revenue growth in dollar terms with impact from 2.8% sequential decline in core business. Weakening in core business was higher compared to previous quarters and mainly seen in financial services, retail, communications and energy & utilities segments. Softness in the near...

Monthly Eco Chartbook: Gradual recovery on the cards. IIP: IIP improves marginally. INFO: Commentary lack new growth impetus. Infrastructure: Execution a mix bag. Logistics: Insipid quarter beckons

Our positive outlook is based on (1) Greater focus on large deals (56% YoY in 9MFY20 TCV on S&M velocity, partnerships), (2) Pricing lever in digital (highest digital growth in tier-1 IT), (3) Completion of accelerated investment phase & multiple levers to keep margin steady, and (4) Improving supply metrics (declining attrition, stable sub-contracting). We expect USD rev/EPS CAGR of 10/12% over FY20-22E factoring USD rev growth at 9.6/9.8/9.8% and EBIT% at 21.6/21.9/22.1% for FY20/21/22E. Risk-reward favourable with INFY valuations at ~30% discount (peak) to TCS. In-line rev/margin and a positive troika of rev guidance increase, attrition decline and Boards clean chit on whistleblower allegations marked 3Q. Maintain BUY (top pick in tier-1 IT) with TP of Rs 850, at 18x Dec-21E EPS (unchanged est/multiple).

Infosys (INFO)'s Q3FY20 operating performance fell tad short on expectations led by operating margin miss (EBIT margins at 21.9% V/s our est. of 22.4%).

The stock correction and partial recovery (midway) following the whistleblower allegations (and clarifications) provide an opportunity with INFY available at its median valuations (at peak discount to TCS). Expect USD rev/EPS at 10/9% CAGR over FY19-22E and upgrade to BUY (NEU earlier) with TP of Rs 840, at 18x (unchanged) Sep-21E EPS. We upgrade Infosys (INFY) to BUY based on better visibility on growth, stable margin trajectory and the recent stock underperformance. Sustainable growth momentum and steady margin are premised on (1) Greater focus on large deals (77% YoY in 1H & broad-based on S&M; velocity, partnerships), (2) Recovery in T25 and Large account mining, (3) Pricing lever in Digital, and (4) Completion of accelerated investment phase (localisation, innovation hubs, S&M;). These are getting manifested in INFYs growth (400bps premium over sector avg. growth) and operational trajectory (EBIT% at lowest gap vs. TCS in 5-qtrs). The recent Analyst meet highlighted some key initiatives by INFY.

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Infosys' (INFO) at its investor meet reiterated the progress of its 3 year strategy viz., FY19 gain stability, FY20 build momentum and FY21 accelerate growth. In fact, it has already seen some acceleration, revenue growth guidance increased twice in H1FY20, and is confident of sustaining the same through a combination of growth in digital solutions and large deals. Mr Nandan Nilekani reiterated that INFO has always deployed and practices highest level of corporate governance across all its business functions. However, as always, INFO would wait for the outcome of the investigation process for the recent...

We attended Infosys' analyst meet in Bengaluru wherein Nandan Nilekani (the chairman) addressed whistleblower complaints and highlighted that Infosys follows highest levels of corporate governance. In addition, it was highlighted that all due process has been followed in financial reporting. Further, large deals also go through due process of audit and are an integral part of the company's growth strategy. Going forward, the company will continue to grow through large deals and has taken appropriate initiatives to improve win ratio of large deals. Infosys has embarked on a cost...

We attended Infosys analyst meet in Bangalore & came convinced with management long term strategy for driving shareholder returns. Infosys leadership team has done some major changes in last 2 years (investments...