Buy Infosys; target of Rs 4200: Emkay

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Emkay Global Financial Services research report on Infosys“Infosys’s Sep’14 quarter was consistent according to us and comes in a welcome relief given the inconsistency associated with Infy’s performance for the major part of past few years. We hope that Sep’14 marks a return to Infosys’s predictable ways which should help restore investor’s faith in Infosys after the long streak of disappointments.”“Infosys’s new CEO sticks to NRN”s plans of cutting Infosys’s underperformance versus peers in 3 years times (note that NRN had laid out a 3 yr plan when he rejoined the company in June’13). We appreciate that DR Vishal Sikka does not intend to go for a major transformation (read: rock the boat) but wants to focus on invigorating Infosys’s growth by way of improvising Infosys’s current delivery offerings through automation and innovation. Infosys’s step up in S&M investments ( S&M expenses increased to 5.8% of revenues in Sep’14 quarter V/s 5.2% in June’14 quarter) is encouraging as Infosys sets out on course correction under the new management team. We will continue to monitor Infosys’s S&M investments, client metrics and employee attrition as early signs of Infosys’s revival falling in place.”“We raise our FY15/16E EPS by 3/2% each on higher margin assumptions (as US$ revenue estimates remain largely unchanged). Increase our target multiple to 17x ( V/s 16x earlier) as we find greater comfort in Infosys’s financial performance and back a more consistent performance ahead which should help drive re-rating ahead . BUY stays, TP Rs 4,200 ( V/s Rs 4,000 earlier),” says Emkay Global Financial Services research report.  

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