Dolat Capital's report on Infosys
Volume grew by 4.2% QoQ, best in last 12 quarters. The company expects strong volume momentum to continue despite the mixed view on client’sbudgets trends.
Company has maintained guidance of 7-9% $ revenue growth at Q2 exchange rates, implying -1% to 6% QoQ growth for Q4, further adding suspense on trend forward.
It has added 59 new clients (gross) in the quarter and expects trends to better both on discretionary, non-discretionary and digital across verticals except for Telecom, select Energy/manufacturing clients.
No concern on Productivity going forward despite the weak realization trend in recent past as it is witnessing uptick in pockets and would spread across verticals. Not expecting any specific concerns in any of the geography in particular.
"We believe CEO Dr Sikka has helped in loads of confidence restoration through its commentary on its positive interactions with all stakeholders, 100% variable payout for entire workforce in Q3, sustained deal traction and endeavor to regain its bellwether tag in the industry through leading new technology and strong financial outperformance.We believe the strong volume growth (4.2% QQ), better commentary outlook, broad basing of growth and improved OPM profile at about 26% would help Infosys in its efforts on confidence restoration and would mean sustained marketperformance as long as it keep on delivering in line with its aspiration on improved volume (15%+) and profitability (26%+). We have broadly maintained our estimates with a Revenue/earnings CAGR of 13%/14% over FY15-17E. We maintain our rating ofMarket-performer on the stock with a TP of Rs 2285 valued at 16x on FY17E earnings (inline with current discounting). Accumulate the stock for target price of Rs 2285", says Dolat Capital research report.
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