Buy Infosys; target of Rs 2570: Angel Broking

Angel Broking's report on Infosys

"For 4QFY2015, Infosys posted results below our expectations. It posted a 2.6% qoq dip in USD revenues to US$2,159mn on account of cross currency movement. In Constant Currency (CC) terms, the company posted a sales dip of 0.4% qoq. On the operating front, the EBITDA margin came in 27.7% (V/s 28.0% expected), a dip of 97bp qoq, on account of increase in S&M spends which grew by 8.7% qoq. Consequently the PAT came in at Rs 3,098cr (V/s Rs 3,182cr expected), down 4.7% qoq. In terms of guidance, FY2016 revenues are expected to grow between 10%-12% in CC terms. During the quarter, the dividend pay-out ratio increased to up to 50% of post-tax profits effective FY2015. Also, 1:1 bonus issue of equity shares was done during the period."

"Infosys posted a dip of 2.6% qoq in USD revenues to US$2,159mn on account of cross currency movement. In CC terms, the company posted a sales dip of 0.4% qoq. In terms of markets, the USA posted a 0.7% qoq dip, Europe a 6.1% qoq dip and ROW posted a dip of 5.7% qoq. On CC basis, the USA posted a 0.4% qoq de-growth, Europe posted a 0.3% qoq de-growth and ROW grew by 0.1% qoq. On the operating front, the EBITDA margin came in at 27.7% (V/s 28.0% expected), a dip of 97bp qoq, on account of increase in S&M spends which grew by 8.7% qoq. Consequently the PAT came in at Rs 3,098cr V/s an expected Rs 3,184cr, down 4.7% qoq."

Outlook and valuation: "Going forward, the company has maintained its future CC USD revenue growth guidance for FY2016 at 10-12%. By FY2017, the company expects to lead industry growth and reach a milestone of achieving sales of US$20bn by FY2020. The stock is cheap at current valuations of 15.3x FY2017E earnings. We maintain our Buy rating on the stock with a target price of Rs 2570", says Angel Broking research report.

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