Buy Infosys; target of Rs 800: ICICI Direct

ICICI Direct's research report on Infosys

US$ revenues grew 3.2% QoQ to $2,921 million (above our estimate of 2.2%) mainly led by healthy growth in BFSI and retail. Constant currency (CC) revenues grew 4.2% QoQ vs. our estimate of 3% QoQ. Rupee revenues grew 7.7% QoQ to Rs 20,609 crore At 23.7%, EBIT margins were flat QoQ mainly led by higher compensation (-100 bps), subcontracting cost (-50 bps) offset by rupee depreciation (+80 bps) and pricing, onsite mix (+70 bps) The board has declared an interim dividend of Rs 7 per share.

Outlook

Infosys reported a broad based performance and strong execution on the revenue front. Robust deal wins, recovery in BFSI and margin enhancement levers are expected to accelerate growth. Moreover, it is trading relatively at better valuation of 16x FY20E EPS (vs ~21X FY20E EPS for TCS). Hence, we upgrade our growth estimates and revise our recommendation on the stock to BUY with a revised target price of Rs 800 (18x FY20E EPS).