Hold Infosys; target of Rs 855: ICICI Direct

ICICI Direct's research report on Infosys

Infosys reported an in line performance on the revenue front while margins came in better than expectations. Key highlights of the quarter were strong large deal wins (up 3.7% QoQ to $2.8 billion), robust growth in digital revenues (up 35.9% YoY, 9.9% QoQ) and dip in standalone attrition (fell 210 bps to 19.4%). Owing to a strong H1FY20, Infosys has raised its lower end of constant currency revenue growth guidance to 9-10% (from 8.5-10%) for FY20E while maintaining operating margin guidance of 21-23%. However, we expect growth to moderately surpass the revenue guidance.

Outlook

In line revenue & better-than-expected margins, accelerating deal TCV, digital growth and scope of margin expansion are key positives. Though we expect revenue growth to moderately surpass the upper guided band, the recent run up in the stock and fully priced valuations prompt us to maintain our HOLD rating with a revised target price of Rs 855 (based on 19x FY21E EPS).