Buy Infosys; target of Rs 4207: Angel Broking

Angel Broking`s research report on Infosys“For 1QFY2015, Infosys reported an operating margin and net profit ahead of our expectations while the top-line came in a tad below our expectation. The EBIT margin for the quarter came in at 25.1 percent V/s 25.5 percent in 4QFY2014, a dip of 34bp qoq. This is much higher than an expected 22.6 percent. The company has maintained its USD revenue growth guidance for FY2015 at 7-9 percent, which implies a 2.3-3.5 percent qoq growth for the rest of the qauters in FY2015. We maintain an Buy rating on the stock.” “For 1QFY2015, Infosys posted a 2.0 percent sequential growth in USD revenues to US$2,133mn V/s an expected US$2,151mn. In constant currency (CC) terms, the revenue grew by 1.5 percent qoq. In rupee terms, the revenue came in at Rs12,770cr V/s an expected Rs12,843cr, down 0.8 percent qoq. The EBIT margin came in at 25.1 percent V/s 25.5 percent in 4QFY2014, a dip of 34bp. This is much higher than an expected 22.6 percent. In USD terms, the net profit came in at US$482mn, a qoq dip of 1.0 percent. On a yoy basis, in USD terms, the company posted sales and net profit growth of 7.1 percent and 15.3 percent respectively, while in rupee terms the growth stood at 13.3 percent and 21.6 percent yoy, respectively.” “IT spending outlook for CY2014 bodes well for the FY2015E revenue outlook of the sector in general, and Infosys in specific. We believe Infosys will continue to lag behind its tier-I peers like TCS and HCL Tech on the revenue growth front. Over FY2014-16E, we expect USD and INR revenues to grow at a CAGR of 10.8 percent and 10.8 percent, respectively. We expect the EBIT margin to remain at 24.5 percent in FY2015 and 25.0 percent in FY2016. We value the stock at 18x FY2016E EPS of Rs234, which gives us a target price of Rs4,207, and maintain our Buy rating on the stock,” says Angel Broking research report.

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