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Infosys Ltd Research Report - 20th Jul 2016

IT | Published on Jul 20th 2016

IT

Infosys’ numbers for 1QFY2017 have come in lower than our expectations. Its revenues grew 2.2% on a sequential basis to US$2,501mn (V/s US$2,548mn expected); the growth was mostly volume led. In INR terms, revenues came in at `16,782cr (V/s `17,072cr expected), up 1.4% qoq. In constant currency (CC) terms, sales grew 1.7% qoq. On the operating front, the EBDITA and EBIT margins dipped by ~121bp qoq and ~140bp qoq to 26.5% and 24.1% respectively. Consequently, the PAT de-grew by 4.5% qoq to `3,436cr (V/s `3,514cr expected). The FY2017 revenue guidance has been revised to 10.5%- 12.0% in CC terms. We maintain our Buy rating on the stock with a target price of `1,370. Quarterly highlights: The company’s revenues for the quarter grew 2.2% on a sequential basis to US$2,501mn (V/s US$2,548mn expected) with the growth mostly being led by volumes. In INR terms, revenues came in at `16,782cr (V/s `17,072cr expected), up 1.4% qoq. In CC terms, sales grew 1.7% qoq. In terms of geographies, USA, Europe, and RoW posted a CC qoq growth of 2.4%, (0.3)%, and 4.9% respectively, while India dipped by 8.2% qoq on a CC basis during the quarter. In terms of verticals, FSI posted a CC qoq growth of 1.7%, and Manufacturing & Hi-Tech posted a CC qoq growth of 2.4%. On the operating front, the EBDITA and EBIT margins dipped by ~121bp qoq and ~140bp qoq to 26.5% and 24.1% respectively. Consequently, the PAT de-grew by 4.5% qoq to `3,436cr (V/s `3,514cr expected). Outlook and valuation: Following a soft start to the year, Infosys cut its FY2017 revenue growth guidance to 10.5-12.0% in CC terms from 11.5-13.5% earlier. This implies an ask rate of 3.1%-4.1% for the remainder of the year. It gave a guidance of achieving sales of US$20bn by FY2020. We maintain our Buy rating on the stock.

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CMP 1,082
Target Price 1,370
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)222,103.06
MCAP NSE (Rs in Cr)221,999.70
P/E (x)15.75
EPS (Rs.)61.40
BV (Rs.)277.68
Div Yield (%)2.51
FV (Rs.)5.00
P/BV (x)3.43
EV/Sales (x)3.03
EV/EBITDA (x)11.06

Shareholding Pattern (%)

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

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