Religare's research report on Infosys INFO’s Q3FY16 results beat street estimates, with the company reporting a 0.6% QoQ growth (RCMLe: +0.6%) in US$ revenues and 1.1% in CC terms. Growth was driven by a 3.1% QoQ jump in IT volumes despite unfavourable seasonality impacting the quarter. Margins however slid 60bps QoQ due to pricing drop and lower utilisation. INFO raised its CC FY16 growth guidance to 12.8-13.2% (from 10-12% earlier), implying 1-2.5% QoQ growth for Q4. Overall, we think the continued growth outperformance from INFO would push up its valuation premium to TCS. Maintain BUY with a Mar’17 TP of Rs 1,300 (Rs 1,240 earlier).Overall, Q3FY16 was a good quarter for INFO despite multiple headwinds such as (1) higher furloughs, (2) the Chennai flood impact and (3) a high Q2 base. In Q2FY16, INFO had booked one-time client revenue of US$ 23mn, excluding which growth was impressive at 2.1% QoQ in CC terms considering a seasonally weak Q3. INFO’s industry-leading growth is likely to provide room for PE expansion over TCS. We marginally raise our EPS estimates (+1-2%) and roll over to a Mar’17 TP of R 1,300 (from a Sep’16 TP of Rs 1,240) set at 17.5x. Maintain BUY. 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.
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