Hold Infosys; target of Rs 1410: ICICI Direct

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ICICI Direct's research report on Infosys

US$ revenues grew 0.9% QoQ to $2,831 million, largely in line with our 1.7% growth and $2,853 million estimate. Constant currency (CC) revenues grew 2.3% QoQ vs. our estimate of 2.5% QoQ. Rupee revenues grew 5.8% QoQ to Rs 19,128 crore, largely in line with our Rs 19,118.9 crore estimates At 23.7%, EBIT margins declined 100 bps QoQ in line with our 23.8% and 90 bps decline estimate Reported PAT of Rs 3,612 was below our Rs 3,728 crore estimate mainly due to write off of Rs 270 crore for Panaya acquisition.  The board has recommended a bonus issue of equity shares in the ratio of 1:1.

Outlook

Infosys reported Q1FY19 earnings with the operating performance largely in line with our expectations. Better momentum in deal win and digital momentum are also encouraging. However, higher attrition and exit at the senior level needs to be closely monitored for consistency in revenue growth. Hence, we maintain our HOLD rating on the stock with revised target price of Rs 1410 (18x FY20E EPS).

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