July 25, 2016 / 11:57 IST
ICICI Direct's research report on Infosys
Infosys reported subdued revenue growth of 2.2% sequentially in dollar terms and 1.7% sequentially in constant currency. The revenue growth was well below our expectation of 4% sequential growth in dollar terms. The subdued revenue growth was on account of a slowdown in discretionary spending in Consulting and Packing Implementation (PI) and slower-than-expected ramp up in a few of the deals won previously.
Though Infosys’ reported a weak se t of Q1FY17 results, the improvement in large deals and client matrix lends us comfort that it could be a quarterly blip and revenue growth may improve, going ahead. We anticipate Infosys’ revenues to grow at a CAGR of 12.4% with average EBIT margin of 25.1% in FY16-18E. Furthermore, a weak Q1FY17 is already reflected in its share price. Hence, we maintain our BUY recommendation on Infosys with a revised target price of Rs. 1290 (18x FY18E EPS). We have lowered our target multiple to 18x (19x earlier) to reflect uncertain demand environment post Brexit.
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