ICICI Direct's research report on Infosys
US$ revenues grew 1.8% QoQ to $2,805 million, in line with our 1.9% growth and $2,807 million estimate. Constant currency revenues grew 0.6% QoQ vs. our estimate of 1% QoQ Rupee revenues grew 1.6% QoQ to Rs 18,083 crore, largely in line with our Rs 18,065.3 crore estimate At 24.7%, EBIT margins expanded 40 bps QoQ, above our 24.3% estimate mainly due to lower-than-expected employee expenses (63.9% as a percentage of revenue vs. our estimate of 64.3%) Reported PAT of Rs 3,690 was in line with our Rs 3,593 crore estimate led by better-than-expected operating performance
Outlook
Infosys lowered its margin guidance band to 22-24% in its Q4FY18 earnings commentary. The management indicated its four pillar strategy of growth and increased investment to focus on digital led growth and localisation. The execution on the same front needs to be closely watched. Furthermore, the announcement on returning additional US$2 billion (~5% of market cap) cash to shareholders ($400 million through special dividend, remaining $1.6 billion to be decided by board through dividend or buyback) could restrict the downside in the stock. We maintain our HOLD rating on the stock and maintain our target price of Rs 1110 (15x FY20E EPS).
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