Buy Infosys; target of Rs 805: ICICI Direct

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ICICI Direct's research report on Infosys

Infosys reported a mixed bag performance with revenues above our expectations and a miss on the margins front. Revenue growth was led by 9.9% QoQ growth in digital revenues (vs. TCS’ 5.9% QoQ) partly offset by a decline in the traditional business (down 1.0% QoQ vs. TCS’ 1.5% growth). Margins declined 113 bps sequentially to 21.4% mainly led by lower utilisation (70 bps), transition cost (40 bps), rupee appreciation (30 bps) and localisation and S&M cost (40 bps). This was partly offset by lower bad debt provisioning (30 bps) and absence of one offs. Valuation & Outlook Digital being a multiyear opportunity and relatively less impacted by macro slowdown, will be key growth driver for Infosys. Further, we believe healthy deal wins will enable the company to narrow the revenue and margin gap with TCS.

Outlook

Hence, we maintain BUY rating on the stock with a target price of Rs 805 (based on 18x FY21E EPS, which is 15% discount to TCS).

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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