Sharekhan's research report on InfosysFor three back-to-back quarters now, with a strong show in Q3FY2016, Infosys has beaten earnings estimates. Even in a seasonally weak quarter coupled with Chennai flood, Infosys managed to deliver a 3.1% sequential volume growth and constant-currency growth of 2.1% QoQ (adjusted for $23 million one-off from termination of IMS deal in Q2FY2016). On a reported basis, revenues were up by 0.6% QoQ to $24,077 million. The EBIT margin for the quarter was down by 60BPS to 24.9% owing to lower realisation, down 2.5% QoQ coupled with fall in utilisation, 90BPS QoQ. Aided by lower tax provisioning (27.2% vs 29.0% in Q2FY2016), the net income for the quarter was up by 2% QoQ to Rs3,465 crore. Given the growth acceleration in the recent quarter and strong revenue visibility led by improvement in wins rate, the growth revival strategy is working well under the leadership of Dr Vishal Sikka. Led by earnings beat, we have tweaked our estimates for FY2016 and FY2017. We have also introduced FY2018E estimate in this note. Given the Infosys’s growth leadership among the top four listed peers and surpassing TCS’s growth rate convincingly, we expect valuation re-rating for Infosys to continue. We have also now assigned a valuation multiple of 19x its FY2018E, and revised upward our price target to Rs1,430. We have also maintained our Buy rating on the stock. 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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