Hold Infosys; target of Rs 1110: ICICI Direct

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ICICI Direct's research report on Infosys

US$ revenues grew 1% QoQ to $2,755 million, largely in line with our 1.2% growth and $2,761.4 million estimate. Constant currency revenues grew 0.8% QoQ vs. our estimate of 1.3% QoQ Rupee revenues grew 1.3% QoQ to Rs 17,794 crore, below our Rs 17,866 crore estimates At 24.3%, EBIT margins expanded 10 bps QoQ and were marginally above our 24.2% estimate mainly on account of lower-than-expected general & admin expenses (6.5% as a percentage of revenue vs. our estimate of 7%) Reported PAT of Rs 5,129 crore was above our Rs 3,611.3 crore estimate led by reversal of income tax expense provision associated with Advance Price Agreement (APA) with the US Internal Revenue Service (IRS) amounting to Rs 1,432 crore.

Outlook
Infosys reported Q3FY18 earnings with the operating performance largely in line with our expectations. Newly appointed CEO Salil Parekh highlighted that he would outline his strategic priorities and reconfirm the capital allocation plan by April, 2018. We roll our estimates to FY20E and expect rupee revenue to grow at a CAGR of 9.1% in FY18-20E. We maintain our HOLD recommendation on the stock with a revised target price of Rs 1110 (15x FY20E EPS).
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