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Infosys Ltd Research Report - 21st Jan 2016

IT | Published on Jan 20th 2016

IT

For 3QFY2016, Infosys posted a 0.6% sequential growth in USD revenues to US$2,407mn (V/s an expected US$2,368mn). In constant currency (CC) terms, the company posted a 1.1% qoq growth. Volume growth during the quarter was of 3.1% qoq. On the operating front, the EBITDA margin came in at 27.2% (V/s an expected 27.0%) dipping by 62bp qoq. This was owing to pricing decline by 2.5% qoq and lower utilization. Consequently, the PAT came in at Rs3,465cr (V/s an expected Rs3,251cr), a growth of 2.0% qoq. Overall, the Management is upbeat about the company’s future prospects, given the strong order book position which is guided towards US$3bn. Also, the Management has guided towards a higher revenue growth for FY2016, ie of 12.8-13.2% in CC terms and 16.2-16.6% in `terms, on an exchange rate of Rs66.16/US$ (as on December 31, 2015). The earlier guidance was of 10-12% revenue growth in CC terms for FY2016. We maintain our Buy rating on the stock with a target price of Rs1,347. Quarterly highlights: For 3QFY2016, Infosys posted a 0.6% sequential growth in USD revenues to US$2,407mn (V/s an expected US$2,368mn). In constant currency (CC) terms, the company posted a 1.1% qoq growth. Volume growth during the quarter was of 3.1% qoq. On the operating front, the EBITDA margin came in at 27.2% (V/s an expected 27.0%) dipping by 62bp qoq. This was owing to pricing decline by 2.5% qoq and lower utilization. Consequently, the PAT came in at Rs3,465cr (V/s an expected Rs3,251cr), a growth of 2.0% qoq In terms of client additions, the company added 4 clients in the US$25mn+ bracket and one in the US$50mn+ bracket. Overall, 1045 clients were active during the quarter. The Management is upbeat about the future prospects of the company given the strong order book position, which is guided towards US$3bn. Outlook and valuation: The company has revised its future CC revenue growth guidance for FY2016 to 12.8-13.2%. By FY2017, the company expects to lead industry growth and reach a milestone of achieving sales of US$20bn by FY2020. We maintain our Buy rating on the stock.

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CMP 1,139
Target Price 1,347
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)220,828.26
MCAP NSE (Rs in Cr)220,885.68
P/E (x)15.66
EPS (Rs.)61.40
BV (Rs.)277.68
Div Yield (%)2.52
FV (Rs.)5.00
P/BV (x)3.41
EV/Sales (x)3.02
EV/EBITDA (x)10.99

Shareholding Pattern (%)

Foreign58.0
Institution18.0
Promoter13.0
Public & Others10.0
Corporate1.0
Grand Total100.0

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