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Last Updated : Jan 14, 2019 09:30 AM IST | Source: Moneycontrol.com

Infosys Q3 review: Should you buy, sell or hold the stock?

The IT major reported 12 percent quarter on quarter (QoQ) decline in December quarter net profit to Rs 3,609 from Rs 4,110 crore last quarter

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Analysts remain largely mixed on Infosys’ Q3 performance, especially highlighting the pressure on margins. Upbeat about better revenue and revenue guidance, some brokerages such as CLSA have raised target price.

The IT major reported 12 percent quarter on quarter (QoQ) decline in December quarter net profit to Rs 3,609 from Rs 4,110 crore last quarter.

The revenue was at Rs 21,400 crore, up around 4 percent over the previous quarter's Rs 20,609 crore.

The earnings before interest and taxes (EBIT) was at Rs 4,830 crore, while the EBIT margin was 22.6 percent. The company has maintained FY19 EBIT margin guidance at 22-24 percent.

The dollar revenue grew 2 percent quarter-on-quarter to $2,987 million.

The constant currency revenue growth was 2.7 percent. Interestingly, the company raised its FY19 constant currency guidance to 8.5-9 percent from 6-8 percent.

The company announced a buyback of Rs 8,260 crore via the open market at a maximum price of Rs 800 apiece and announced a special dividend of Rs 4 apiece.

Brokerage: Credit Suisse | Rating: Neutral | Target: Rs 680

The brokerage house has revised estimates slightly due to lower margin assumptions. Further, it noted that improved revenue growth was positive but margin cut could revise estimates down.

Brokerage: Morgan Stanley | Rating: Equal-weight | Target: Rs 759

Morgan Stanley said that the results strongly beat the revenue but missed on margin. It raised FY19 revenue guidance.

Brokerage: Macquarie | Rating: Outperform | Target: Rs 770

The research firm said that the revenue surprised them, and upgrading of revenue guidance is positive. A margin pick-up is unlikely in the near term as investments, ramping-up of large deals and wage corrections may cap margin pick-up.

Brokerage: Kotak Institutional Equities | Rating: Maintain add | Target: Cut to Rs 760 from Rs 780

Kotak Institutional Equities said that it was impressed with strong revenue growth, large deal signings and stable client metrics. Revenue outlook improved but comes at a cost of margin, it observed. It has upgraded revenue estimates but cut EPS estimates by 3-4 percent.

Brokerage: HSBC | Rating: Buy | Target: Rs 880

HSBC said that higher than estimated revenue in Q3 and guidance upgrades reinforce positive view. Cost pressure may lead to better pricing in a stable currency environment, it added. The company remains its top pick in the sector.

Brokerage: CLSA | Rating: Buy | Target: Raised to Rs 930 from Rs 910

CLSA said that growth acceleration, capital return and a demand recovery merit a rerating. While margins missed, revenue beat expectations in a seasonally soft quarter. The growth is broad-based, led by key geographies—US and Europe. Large deal wins remained strong at $1.6 billion, it observed.

Brokerage: Investec | Rating: Buy | Target: Cut to Rs 784 from Rs 820

Investec said the results were a solid beat on revenue and expected margin weakness to continue. It highlighted that the commentary suggests continued margin weakness in Q4FY19.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jan 14, 2019 09:30 am
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