Accumulate Infosys; target of Rs 1238: Arihant Capital

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Arihant Capital's research report on Infosys

Revenues grew year-on-year by 8.0% in USD terms; 5.8% in constant currency terms. Revenues grew sequentially by 1.0% in USD terms; 0.8 % in constant currency terms. Operating margin improved to 24.3% from 24.2% in Q2 18. EPS at Rs 22.5, year-on-year growth of 39% and sequential growth of 38%. EPS of Rs 22.5 includes positive impact of Rs 6.29 from Advance Pricing Agreement (APA) with the US IRS. 9 months year-on-year revenue growth at 6.5% in USD terms; 5.6% in constant currency terms. Cash flow from operating activities were at Rs 4257 crore, compared to Rs 2831 cr in Q2 18. Standalone attrition declined to 15.8% from 17.2% in Q2 18.

Outlook
Even in weak quarter and after lot of head winds, new management of Infosys has maintained its good and stable run by maintaining its margins. We expect Infosys to perform well in the coming quarter under the new management and have assigned a PE of 16.5x to its FY19E EPS of Rs 75 and have arrived at fair value of Rs 1,238 per share. At CMP Rs 1078 stock trades at 14(x) its FY19E earnings. We have Accumulate rating on the stock.
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