Buy Infosys; target of Rs 4550: P Lilladher

Prabhudas Lilladher's report on Infosys

"Infosys' pyramid got skewed as growth rate decelerated hurting the margin. Per employee cost since Q1FY10 has increased by ~67 percent and ~85 percent for 'SDE' and 'SG&A', respectively, due to increase by ~15.5 percentage points to 71.2 percent professionals with greater than three years work experience. We expect restructuring to improve the much needed employee pyramid. Utilization leaves limited room for manoeuvrability, but we expect hiring pick‐up in FY15 to help regain the lost pyramid strength."

"According to the management, the customer satisfaction survey and engagement-level feedback have shown improvement over the last few quarters. Moreover, we expect the metrics to improve as the restructuring process continues to stay at the centre stage."

"The ongoing endeavour is likely to help bring better value to the clients with improved client satisfaction along with margin expansion in FY15. Reiterate 'BUY' with TP of Rs 4,550, 18x FY16E earnings estimate," says Prabhudas Lilladher research report.

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