ICICI Direct is bullish on Infosys has recommended buy rating on the stock with a target price of Rs 750 in its research report dated April 21, 2020.
ICICI Direct's research report on Infosys
Infosys reported a poor set of Q4FY20 numbers mainly due to Covid-19 related challenges. The company lost ~US$30 million revenues due to Covid-19 of which majority was due to supply led concerns. The revenue decline was across geographies and across vertical except manufacturing & other vertical. Margins dipped 80 bps due to dip in utilisation (impact of 90 bps), CSR (50 bps), visa cost (40 bps) offset by rupee depreciation (50 bps) and cost efficiency (50 bps). The company has won US$1.6 billion deals (up 5.1% YoY) of which 56% are net new deals. The deals won are across geographies and verticals. Digital revenues continue to be strong (up 29.6% YoY and constitute 41.9% of overall revenues). The company expects digital technologies to pick up pace post the Covid-19 crisis.
The company has shown a visible improvement in performance since the change in management. We expect Infosys to continue to make steady improvement in financials post these near-term challenges. Digital acceleration, large deal wins vendor consolidation and cost rationalisation remains key long term drivers. Further, the company has maintained healthy cash flow generation and has a consistent dividend payout policy. We remain positive on the stock and maintain our BUY rating with a target price of Rs 750/share.
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