ICICIdirect.com's report on Infosys
Infosys reported robust Q3FY15 earnings led by growth in the US, India, BFSI, lifesciences, application maintenance and IMS
Constant currency (CC) revenues grew 2.6% while $ revenues grew 0.8% QoQ to $2,218 million, ($2,223 million, 1% growth estimate). Consolidated IT services grew 0.7% QoQ, led by volumes (4.2%)
EBIT margins improved 61 bps QoQ to 26.7% (26.5% estimate) while net income came at Rs 3,250 crore vs. Rs 3,232 crore estimate led by margin beat
Though Infosys maintained its FY15E US$ revenue growth guidance of 7-9% YoY, the guidance assumes the September 30 period ending exchange rates
Infosys emphasised on the massive embrace of design thinking – new – in renewing existing offerings such as consulting services, product engineering and Finacle. The company noted that next generation PLM, integration of physical with digital, is creating opportunities with Infosys starting three to six such engagements in the last four months. Infy is also busy revitalising the existing Finacle installed base under its new head Michael Reh by focussing on digital, mobility and analytics services.
"We expect Infosys to report revenue, EPS CAGR of 8%, 14%, respectively, in FY14-16E (with average 26.1% EBIT margins in FY15-16E), slower than 18.2%, 12.2% reported in FY09-14 along with average 28.1% margins. Healthy volume growth, client additions and improving operating metric could aid growth momentum. We continue to value Infy at 20x its FY16E EPS (13% premium to its FY09-14 one-year forward PE average of 17.7x) and maintain our Rs 2,400 target price and BUY rating. Buy the stock with a target price of Rs 2400", says ICICIdirect.com research report.
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