Buy Infosys; target of Rs 1200: Axis Direct

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Axis Direct's research report on Infosys

Despite leadership changes, Infosys’ Q2 revenue was in line with expectation. EBIT margin (24%; up 10 bps QoQ) was better driven by efficiencies which offset wage increases during the quarter. New Services (9.4% of rev; up 17% QoQ) recorded robust performance. This coupled with continued momentum in deal wins (USD 731 mn; H1: USD 1.4 bn), strong execution (utilization up 70 bps QoQ to 84.7%) and margin resilience showcase Infosys’ strong execution capabilities.

Outlook
We expect Infosys to deliver USD revenue growth of 8%/9% in FY18/FY19 with EBIT margin of 24% and 25%. Our TP stands at Rs 1,200; implies 29% upside from CMP of Rs 927. Maintain BUY. The stock trades at 14x/12x FY18/19 EPS of Rs 67/ Rs 75.

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