Buy Infosys; target of Rs 1242: Geojit BNP Paribas

Infosys Ltd has reported a disappointing quarter with consolidated USD revenue growth of 2.2% QoQ in Q1FY17 (INR revenue growth of 1.4%). Discretionary spending pressure in consulting and package implementations services coupled with slower ramp up in large deals impacted the growth in the quarter. Revenue contribution from consulting and package services declined 1% QoQ. Volumes growth stood at muted 2.2% dragged by both onsite (+3.3%) and offshore (+1.8%) volumes. The client addition remains modest with the company adding 34 new clients, taking the total base to 1,126. Besides, it has added three large clients to the USD100 mn-plus category taking the total count to 17. Large deal wins during the quarter remained strong at USD809 mn.   

We have lowered our revenue and PAT estimates by 1/3% and 3/4% respectively for FY17E/FY18E. However, we remain positive of the stock given its strong client mining capabilities, large deal wins and cost optimisation efforts (leveraging automation to offset the pricing pressure). We upgrade the stock to ‘BUY’ with a target price of Rs 1,242 (based on 17x FY18E P/E), implies a potential upside of 15%. For all recommendations, 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.