Buy Infosys; target of Rs 1290: ICICI Direct

Infosys Technologies (Infy) held its analyst meet to articulate its strategies in the midst of a cautious business environment prevailing in the industry. The management did highlight that Q2FY17 would be better than Q1FY17 by addressing challenges in consulting vertical while Finacle witnessed it in Q1FY17. However, the management cited caution about the business environment on account of uncertainty prevailing across the industry and due to client specific concerns post Brexit. While Infosys would evaluate its full year FY17 revenue guidance of 10.5-12% in CC terms post Q2FY17 results, an overall cautious environment post Brexit could pose a risk to its FY17 guidance, in our view. On the other hand, the company’s dual strategy of renew and new along with automation platforms as ‘Mana’ is going on the right trajectory paving the way for the company’s growth on a long term basis.

While Infosys would evaluate its FY17 guidance post Q2FY17 results due to the impact of near term headwinds, the efforts towards Renew & New strategy such as increase in large deal win and top client revenues would pay off over the medium term. We expect Infosys revenues to grow at a CAGR of 12.4% with average EBIT margin of 25.1% over FY16-18E. Hence, we maintain our BUY recommendation on Infosys with a revised target price of Rs 1290 (18x its FY18E EPS).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.