Buy Infosys; target of Rs 2400: ICICIdirect

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ICICIdirect.com's report on Infosys

"Infosys is undergoing another strategic transformation and is emphasising broadly on two themes: 1) renewing the core business and 2) innovating in new business along with the core foundations of education and connectedness, thereby harmonising employees across renew and new with no left out feeling. Acknowledging that this transformation is demanding and could stretch, the management is confident of execution and believes such a company could sustain 15-18% revenue growth and 25-28% EBIT margins."

"We estimate Infosys will report rupee revenue, earnings CAGR of 9%, 14% over FY14-16E (average 25.6% EBIT margins in FY15-16E), vs. 18%, 12% reported in FY09-14 (average 28.1%), respectively. Though earnings trajectory could improve over time, incoming CEO continues to impress with his strategic direction. Modest earnings upgrade led by increase in our rupee assumption coupled with multiple revision (20x vs. 19x earlier) lead to a revised target price of Rs 2,400 vs. Rs 2,250 earlier. Maintain BUY", says ICICIdirect.com research report.

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