Moneycontrol Bureau
Though investors hurriedly sold shares of Infosys on Thursday after management’s cautious stance on cost pressures, analysts say there is nothing to worry. Credit Suisse says that 150-200 basis points (bps) wage hike headwind on Q1 margins is usual annual phenomena. It believes that there is nothing incremental from management comments to warrant any risks to estimates at this point.
Earlier, in an interview to CNBC-TV18, COO Pravin Rao had warned that an increase in visa and compensation costs is likely to impact margins by 200 basis points in the first quarter of FY17 as compared to rest of the year. Following which, the stock shed around 4 percent taking it below Rs 1200 a piece.
However, Credit Suisse says there does not seem to be material changes in management commentary. It says that management's tone on its FY17 guidance remains the same, it continues to be positive on financial services excluding insurance, sounds cautious on insurance and uncertainon retail.
The brokerage firm adds that, in an investor conference, Rao indicated some volatility in the demand environment, some vertical specific challenges and 'quarterly bumps' in the short-term.
"There seems to be additional caution on healthcare and hope in recovery in insurance has not materialised," it says in a report. Credit Suisse has an outperfom rating on Infosys with a target price of Rs 1450.
Meanwhile, Bank of America Merill Lynch feels better operational rigor is driving up revenue growth and the strategy of balancing profitability with price points is work-under-progress but credible. It, too, maintains buy rating with a target price of Rs 1430 per share.
BoAML says that pricing is likely to remain on a declining curve but is in-line with the trend for the sector and company’s improved focus on quality of proposals, empowering ofsales team and innovation in deals have led to an uptick in win rates.
At 11:15 hrs Infosys was quoting at Rs 1,189.00, up Rs 3.55, or 0.30 percent on the BSE.Follow @NasrinzStory
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