Buy Infosys; target of Rs 1240: Reliance Securities

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Reliance Securities' research report on Infosys

Infosys has delivered a subdued performance with its revenue growing by 1% QoQ (0.8% QoQ in CC terms) to US$2,755mn in 3QFY18, which is a seasonally weak quarter. Its EBIT margin expanded by 10bps QoQ, owing to improved operational efficiency and higher utilisation. While volume grew by a decent 1.6% QoQ, blended billing rate declined by 0.7% QoQ. From vertical perspective, BFSI continued to remain under stress with revenue growing by a meagre 0.1% QoQ. However, within BFSI, the Insurance sub-vertical clocked a healthy 7.3% QoQ growth in USD revenue, while pressure is clearly seen more on the BFS sub-vertical, which declined by 2.6% QoQ. On a positive note, revenue from Retail & CPG grew by 3.2% QoQ, while revenue from Transport & Logistics increased by 6% QoQ. Energy & Utilities vertical also grew by a healthy 6.5% QoQ, marking the third successive quarter of >6% growth. On the flip side, revenue from Life Sciences and Healthcare verticals declined by 3.2% and 4.1%, respectively. The Management reiterated its CC revenue growth guidance at 5.5-6.5% for FY18E. Geo-wise, North America grew by 0.7% QoQ, while Europe clocked a strong 6.2% QoQ growth in USD terms.

Outlook
Rolling over our estimates to FY20E, we retain our BUY recommendation on the stock with a revised Target Price of Rs1,240 (from Rs1,035 earlier).
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