Buy Infosys; target of Rs 1400: ICICIDirect

ICICIDirect's research report on InfosysInfosys reported steady Q4FY16 earnings as dollar revenue growth and EBIT margins were in line with our estimates while FY17E revenue growth guidance was ahead of consensus estimates US$ revenues grew 1.6% QoQ to $2,446 million, in line with our 1.8% growth and $2,450 million estimate Infosys expects FY17E revenues to grow 11.5-13.5% in constant currency terms and 11.8-13.8% in US$ terms to $10,622-10,812 million. Rupee revenues could grow 12.7-14.7% aided by currency tailwinds (66.26 assumed in guidance vs. 65.69 FY16 average) Reported PAT of | 3,597 crore was in line with our | 3,620 crore estimate. We estimate Infosys will report revenue, PAT CAGR of 13%, 12%, respectively, in FY16-18E (with average 25.5% EBIT margins in FY17-18E), slower than 17.8%, 14.6% reported in FY11-16 along with average 26.5% margins. Over time, the earnings trajectory could improve further as strategic initiatives (such as top account mining, large deal wins, lower attrition and improving per-capita productivity) of the new management are bearing early fruits. We now value Infosys at 19x its FY18E EPS of | 74 (20x its FY17E EPS earlier) to arrive at our revised target price of | 1,400 (| 1,350). Lower multiple is to account to longer time horizon. 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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