Accumulate Infosys; target of Rs 782: Prabhudas Lilladher

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Prabhudas Lilladher's research report on Infosys

Infosys reported inline Q4FY19 revenue performance but sharp miss on margins due to large deal impact & investments on people. Management guided a lower than expected revenue growth for FY20E due to uncertain macro environment. EBIT margin guidance was lowered to 21%-23% from 22-24%, the lower margin guidance was due to need of investments ahead for demand acceleration. We don't see guidance retuning back to beat-and-raise strategy as we believe macro environment vulnerability had led to lower revenue guidance. Revenue growth in this quarter was largely led by communication vertical, BFSI & retail both disappointed. If growth acceleration doesn't happen in BFSI in next 2 quarters, that will lead to our multiple de-rating for Infosys. We are confident about Mr. Salil Parekh's leadership & execution but we are cautious about margin expansion due to headwinds such as higher compensation, continued investments & impact on margin due to transition & ramp-up of recently won deals. We have cut our EPS estimates by 2.7% & 3.4% of FY20E/FY21E to factor lower than expected guidance & reduced margin assumption (-70bps: FY20E, -92bps: FY21E).

Outlook

Our revised TP stands at Rs.782 (earlier: Rs.808) valued at 18.5x Mar-21 multiple. We expect share buyback (max price of Rs.800) to cushion earnings downgrade in near term. Maintain Accumulate.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.

Read More