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Buy, sell or hold, what should investors do with Infosys after Q1 results?

Research house Citi has maintained buy and raised target to Rs 1,000 from Rs 825 per share.

July 16, 2020 / 02:37 PM IST

The share price of Infosys rose over 10 percent intraday on July 16, a day after the IT services company declared its June quarter numbers (Q1FY21).

It touched a 52-week high of Rs 939.70.

The company on July 15 reported a 2 percent decline in the June quarter profit at Rs 4,233 crore on strong operating performance. The company surprised the street by giving full-year constant currency revenue growth guidance.

Revenue from operations increased 1.7 percent sequentially to Rs 23,665 crore in the June quarter and dollar revenue fell 2.4 percent quarter-on-quarter to $3,121 million for the quarter.

Constant currency revenue for the quarter fell 2 percent on a sequential basis.


"The stock has been in an uptrend forming a higher top and higher bottom since March low of 509. This week, the price has crossed the long-term falling resistance trend line connecting highs of 847 and 812. The stock on Wednesday hit a new all-time high of 848. Thus, suggesting a change in long-term trend correction mode to an uptrend," said Ashish Chaturmohta, Head of Technicals and Derivatives, Sanctum Wealth Management.

"MACD on the weekly chart has moved above the equilibrium level of zero, indicating a change in the ongoing trend. Hence, now crossing and sustaining above Rs 848 levels, the stock can continue its uptrend towards the next resistance level of Rs 950. On the downside, 790-780 zone, which was the recent breakout level, will act as a support for the stock. However, a break below Rs 780 levels, profit booking can be seen in the stock," he added.

Also Read - Infosys Q1 profit at Rs 4,233 crore, FY21 constant currency revenue growth seen at 0-2%

Motilal Oswal | Rating: Buy | Target: Rs 1050

The company’s absolute and relative performance (v/s TCS and Wipro) during the quarter is indicative of some of the investments made in the previous years are now paying off.

The higher variable payouts notwithstanding, the company has delivered robust margin expansion. Notably, this was in a quarter that faced significant disruptions, on both the demand and supply fronts.

Motilal Oswal expects Infosys to be a key beneficiary in terms of recovery in IT spends in FY22 and within the sector, its relative preference for Infosys over TCS is premised on the company’s headroom for margin expansion.

Sharekhan | Rating: Buy | Target: Rs 920

Infosys reported better-than-expected results on all fronts despite supply-side constraints, with strong deal wins and FCF generation.

Despite concerns about a second lockdown, the company expects positive growth in FY2021E because of its strong relationships with clients, traction for its digital offerings, higher localisation in the US, strong deal wins, especially in the BFSI vertical, and a healthy deal pipeline.

Even as a reduction in IT spending is expected during 2020, Infosys is well poised to gain share in the recessionary environment and outperform peers in terms of revenue growth in FY2021E.

Prabhudas Lilladher | Rating: Buy | Target: Rs 1,037

Infosys surprised the street by reinstating revenue guidance of (0-2% CC YoY growth for FY21), giving confidence about growth visibility over the rest of the year coupled with strong deal momentum.

Prabhudas Lilladher increased its EPS estimates by 15%/9% for FY22/23E led by revenue & margin upgrade and assigned 20X multiple and value it on Sep-22 EPS of Rs 51.8 to arrive at a changed target price of Rs 1,037.

Dolat Capital | Rating: Accumulate| Target: Rs 900

Infosys reported exceptional performance in Q1 (compared to its peers) with top-line de-growth of just 2 percent QoQ and with the guidance suggesting flat-to-small-growth, it easily makes the company as the growth leader for FY21E

Dolat Capital increased revenue estimates by 3 percent/2.5 percent for FY21/22 , respectively, and OPM estimate at 22 percent /21.7 percent; resulting in earnings estimates by over 5 percent each for FY21/22E.

UBS | Rating: Neutral | Target: Rs 810

The company’s Q1 numbers beat expectations, while FY21 guidance is a big positive and should help narrow valuation discount to TCS.

UB said it wait and see if it is driven by better demand or share gains.

CLSA | Rating: Buy | Target: Raised to Rs 1,000 from Rs 860

The company could be the only scale player to report YoY growth in FY21.

CLSA has raised FY21/FY22 EPS estimates by 9 percent and with the restoration of formal guidance, PER gap with TCS should decline, CNBC-TV18 said.

Nomura | Rating: Upgrade to buy | Target: Raised to Rs 975

The company’s digital positioning, silver linings during COVID-19 outbreak, bodes well for the demand recovery.

The strong client franchise positions set the company on the path to demand recovery. Nomura sticks to the company being its top pick.

The guidance for growth in FY21 will be taken positively, reported CNBC-TV18.

Citi | Rating: Buy | Target: Raised to Rs 1,000 from Rs 825

The research house has raised EPS estimates by 6-7% percent for FY21E-23 and increased the target multiple to 23x FY22 from 20x, CNBC-TV18 reported.

At 10:13 hrs Infosys was quoting at Rs 937.70, up Rs 106.25, or 12.78 percent on the BSE.

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Moneycontrol News
first published: Jul 16, 2020 10:14 am
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