Accumulate Infosys; target of Rs 1123: KR Choksey

This is second consecutive quarter that the management has cut guidance for the fiscal year 2017. The guidance was initially cut from 11.5%-13.5% to 10.5%-12%. Guidance was further downgraded this quarter to 7.5%-8.5% for FY17E which the management stated was largely due to stress in specific segments and service lines. The guidance cut also buttresses our view of a structural pricing pressure faced by Indian IT companies.

We believe that Infosys is developing the right tools and strategies to tackle an otherwise harsh environment in the global IT space. The company’s use of innovation, both internally and externally, to tackle structural issues in the industry should yield results going ahead. Programs such as Design Thinking, Zero Distance and New & Renew should improve client engagement, revenue per client, adoptions and performance. We have “ACCUMULATE” rating on the stock by assigning multiple of 16x to its FY18E EPS of INR. 70 to arrive at a price target of INR 1,123.  For all recommendations, 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.