Kotak Securities' report on Infosys
In the 2QFY15 analyst call, Dr. Vishal Sikka had laid down his vision to convert Infosys into a new-age services company, having higher proportion of non-linear revenues. The focus of Infosys is on renewing all existing services while introducing new products / services in an eco-system of various alliances with vendors, start-ups, etc. Education / training of employees on these initiatives will be the foundation of this strategy, which Infosys calls - Human Revolution.
The new strategy is aimed at improving employee productivity which currently stands at $53000 per employee.
With these new initiatives, Infosys is targeting to achieve growth rates of 18%-20%, with margins of 25% - 28% on a sustainable basis, over the long term.
We opine that, Infosys is taking concrete steps towards achieving its long-term objectives. Details on shorter term impact will be provided in due course.
We have been positive on the long-term demand prospects for quite some time. With the developed economies (especially US) stabilizing, we do expect the demand scenario to improve over the next few quarters.
The margins for Infosys seem to be improving ahead of our expectations.
The new strategy should allow Infosys to improve growth rates over the long term with sustained margins.
"Our Target Price stands at Rs 2239. We recommend buying the stock at declines, post the recent run-up. ACCUMULATE", says Kotak Securities research report.
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