Accumulate Infosys; target of Rs 3640: Angel Broking

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26 Aug, 2025 12:21

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Angel Broking`s report on Infosys

"Infosys reported its 4QFY2014 results with operating margins and net profit ahead of our expectations and top-line inline with our estimates. The key positive surprise in the result was expansion in EBIT margin by 46bp qoq to 25.5%, while the key negative surprise was muted volume growth of 0.4% qoq. The company has given USD revenue growth guidance for FY2015 of 7-9%, which is in line with our expectations. We maintain our Accumulate rating on the stock.

For 4QFY2014, Infosys reported a USD revenue of USD 2,092mn, down 0.4% qoq, largely because of 1.3% qoq onsite volume decline. In INR terms, the revenue came in at Rs 12,875cr, down 1.2% qoq. The company posted an EBIT margin growth of 46bp qoq to 25.5%, led by operational efficiency with inch up in utilization level and sequential decline in employee costs. The PAT for the quarter stood at Rs 2,992cr, up 4.1% qoq, aided by operating margin gains and higher other income of Rs 851cr as against Rs 731cr in 3QFY2014.

The Management commentary indicated that though the deal pipeline seems to be better than what it was the same time last year, the company is witnessing sporadic project cancellations or ramp downs in some of its deals. While the improvement in IT spending outlook for CY2014 does bode well for the FY2015E revenue outlook of the sector in general and Infosys in specific, we believe Infosys will continue to lag behind its tier-I peers like TCS and HCL Tech on revenue growth. Over FY2014-16E, we expect USD and INR revenues to grow at a CAGR of 10.6% and 10.8%, respectively. The operating margin of the company is subject to tailwinds of further improvement in utilization rates and cost optimization measures, but faces headwinds because of higher S&M spends and wage hikes in 1QFY2015. We expect the EBIT margin to remain at 24.5% in FY2015 and 25.0% in FY2016. The current set of results as well as the given guidance are largely in line with our expectations and limit a sharp upside potential in the immediate future. We value the stock at 15.5x FY2016E EPS of Rs 236, which gives us a target price of Rs 3,640, and maintain an Accumulate rating on the stock,” says Angel Broking research report.

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