Kotak Securities' report on Infosys
"Volume growth of 4.2% in a seasonally weak quarter was a surprise. Margins beat estimates but largely due to lower provisioning on doubtful debts. On important parameters, the annualized attrition rate has eased to 21.5% in 3Q v/s 25% in 2Q. Client penetration has also improved QoQ and 3 large deals have been signed. On newer initiatives, 9000 employees have been already trained on Design Thinking and 1000 developers on Machine Training. We believe that, these initiatives will shore up the growth rates of Infosys and sustain margins over the longer term, while having some impact on profitability in the short term. Guidance in CC terms has been maintained, we understand. With the developed economies growing / stabilizing, we do expect the demand scenario to improve over the next few quarters. Our FY16E EPS stands at Rs.122 (Rs.121) and TP at Rs.2260 (Rs.2239). ACCUMULATE (Buy at Declines)."
We have been positive on the long-term demand prospects for quite some time. With the developed economies (especially US) stabilizing, we do expect the demand scenario to improve over the next few quarters.
The margins for Infosys seem to be improving ahead of our expectations.
The new strategy should allow Infosys to improve growth rates over the long term with sustained margins.
"Our TP stands at Rs 2260. We recommend buying the stock at declines. ACCUMULATE", says Kotak Securities research report.
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