Prabhudas Lilladher is bullish on Infosys has recommended buy rating on the stock with a target price of Rs 810 in its research report dated January 14, 2019.
Prabhudas Lilladher's research report on Infosys
Led by solid revenue growth in Q3FY19, we raise Infosys USD revenue growth assumptions to 7.8/9.3/9.2% for FY19/FY20/21E (vs 7.5/9.2/9.2% modeled earlier). Infosys would need to deliver 1.9% QoQ in cc in Q4FY19 to achieve 9% cc growth guidance for FY19 which is favorably doable seeing the growth momentum. Our USD/INR assumptions stand at 70/70.5/72 for FY19/FY20/FY21E. Owing to tepid margin execution in Q3FY19 we model EBIT margins at 23.4/24.1/24.4% for FY19/FY20/21E (vs 24.3% in FY18). Hence, despite INR depreciation in FY19 (vs FY18), Infosys is likely to report modest YoY drop in EBIT margin. We maintain our EPS for FY19E at Rs37.5. Buyback announcement and USD revenue upgrade are negated by EBIT margin downgrade and hence we marginally upgrade our EPS estimates by 1.7/1.9% for FY20/FY21E to Rs43/47.
We believe Infosys valuations are reasonable considering the improving growth trajectory. Hence we raise our TP by 2.5% to Rs810 (18x Sep20E EPS). Retain Buy.
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