Infosys Ltd. share price target

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

25 February 2019 Even as INFOs revenue growth improves its FY19 EBIT margin exit at ~22- 22.5% followed by wage hikes in 1QFY20, pose a risk to consensus EBIT estimate of 23.4% for FY20. This is a key concern weighing on the stocks attractiveness. INFOs recent revival under Mr. Salil Parekh in revenue growth (from 4.6% constant currency (CC) in 2QFY18 to 10.1% CC in 3QFY19) came with an EBIT margin decline of 120bp, despite the INR/USD depreciating 11% during the same period. The trend is remarkably similar to the period under Dr. Vishal Sikka, when INFOs revenues increased from 6.3% CC in 2QFY15 to 15% YoY CC in 4QFY16 and 12% in 1QFY17. EBIT margin during this period shrank 200bp and currency had depreciated by 11%. In both instances, however, we see revenue growth gaining priority over margins. In the earlier period, INFO saw its stock price gain 33%, while in the recent period, the uptick in the stock price was a robust 59%.

Infosys Ltd. reported strong growth in top line and healthy deal wins for the period of Q3FY19. Infosys posted revenue growth of 10.1% on YoY basis and 2.7% sequential growth in constant currency terms for the period of Q3FY19. Deal wins came in strong with TCV of $157 cr.

EBIT margin came below expectation at 22.6% down by 118 bps QoQ impacted by oneoffs, increased compensation & investments and lower utilisation. We have increased our revenue estimate for FY19/20, given beat in performance in Q3FY19, upgrade in revenue guidance, sustained investments in digital and strong deal wins. We build revenue CAGR of 13% over FY18-21E. However, due to miss in margin in Q3FY19 with continued investments and rupee appreciation, we tweak our EBIT margin estimate by 50/40bps for FY19E/20E. Hence, we maintain HOLD' rating on the stock with a revised rollover TP of Rs. 802...

OPM fell 280 basis points to 23.2% which saw OP fall 7% to Rs 4959 crore. Other income grew 2% to Rs 753 crore. After providing for depreciation (up 25% to Rs 580 crore), PBT fell 9% to Rs 5132 crore....

Infosys (INFO) Q3FY19 result beat ours and consensus forecast as regards revenue growth metrics CC growth of 2.7% QoQ, large deal TCV of US$1.57 bn and upward revision of FY19 revenue growth guidance to 8.5%-9% in CC. However, EBIT margin decline of 120bps QoQ to 22.6% was a miss....

Led by solid revenue growth in Q3FY19, we raise Infosys USD revenue growth Change in Estimates | Target | Reco assumptions to 7.8/9.3/9.2% for FY19/FY20/21E (vs 7.5/9.2/9.2% modeled earlier). Infosys would need to deliver 1.9% QoQ in cc in Q4FY19 to achieve...

Industrial growth declined to 0.5% in Nov'18 from 8.4% in Oct'18. Manufacturing growth fell sharply to (-) 0.4% from 8.2% in Oct'18. Both consumer (durables and FMCG) and capital goods sectors reported a decline. While base effect explains a part of the decline, lower exports and domestic demand also contributed to the dip. We expect muted growth in the next few months owing to global and domestic headwinds. However, this slowdown is more cyclical than structural and growth is expected to pick up in H2FY20....

Infosys reported mixed results with revenues above our expectations and a margin miss. Constant currency (CC) revenues grew 2.7% QoQ (vs. our estimate of 2.2% QoQ) led by BFSI, energy & utilities and manufacturing. US$ revenues grew 2.3% QoQ to $2,987 million Reported EBIT margins fell 120 bps QoQ to 22.6%. However, adjusting for 40 bps one-time impact of Panaya and Skava, EBIT margins declined 70 bps QoQ to 23% led by a dip in utilisation, onsite mix (-80 bps), compensation (-30 bps), investments in sales (30 bps) and acquisition impact (-20 bps). This was partly offset by...