January 18, 2017 / 17:16 IST
Motilal Oswal's research report on Infosys INFO’s constant currency revenue declined 0.3% QoQ, slightly better than our estimate of -1% QoQ. However, this was overshadowed by: [1] decline across top-client buckets (top account down 12.7% QoQ, top 2-5 down 5.5% QoQ and top 6-10 down 11.6% QoQ) and [2] broad-based weakness ex-BFSI – contrary to expectation of weak BFSI due to RBS ramp-down, and relative stability in other segments.
Outlook
Any hostile regulatory developments against the current visa regime remain an impending risk for the industry at large. The exact hit for companies till then is hard to ascertain, and we thus choose to capture the uncertainty in a slightly cautious multiple. We now value INFO at 17x forward earnings (v/s 18x earlier). Our FY16-19 CC revenue/USD revenue/EPS CAGR stand at 9.4%/8.6%/8.0%. Our target price of INR 1,250 implies 28% upside. INFO remains our preferred play in the sector.
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