Sumit Bilgaiyan
We are quite positive on Infosys. In Q3FY18 it has kept its annual guidance unchanged at 5.5-6.5 percent, in line with this guidance, we expect revenue growth of 1.5 percent in Q4FY18 against 0.8 percent in the previous
quarter.
We see EBITDA margin to expand by 20bp Q-o-Q to 24.5 percent primarily driven by higher utilisation. Execution on profitability has been above expectations over the last few quarters; however, we expect the improvement to slow down as this lever has peaked out.
With this, we expect full-year EBIT margin at 24.3 percent, above the mid-point of the profitability guidance range of 23-25 percent. Our PAT estimate is an increase of 3 percent Q-o-Q, adjusted for the USD 225 million exceptional reversal of income tax expense provision in the previous quarter.
The stock trades at 15.1x FY19E and 13.6x FY20E earnings. We have a buy rating on Infosys with target price of Rs 1,180.
Disclaimer: Sumit Bilgaiyan is the founder of Equity99. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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