MOSL: INFOSYS (Buy)-Good show on profitability-Steady performance and outlook – an encouraging sign
Infosys: Good show on profitability; Steady performance and outlook – an encouraging sign
(INFO IN, Mkt Cap USD38.8b, CMP INR1078, TP INR1250, 16% upside, Buy)
- In-line revenues; optimistic on BFS recovery: 3QFY18 CC revenue growth of 0.8% QoQ was largely in line with our estimate of +1% QoQ. Led by higher furloughs, budget cuts and delayed ramp-ups, a 1.6% QoQ fall in BFS was in contrast to 2QFY18 commentary. However, a pick-up in the vertical starting next quarter, and expectations of a better CY18 v/s CY17 put worries to rest.
- Superior margin execution continues: EBIT margin of 24.3% (+10bp QoQ) exhibited stability, despite wage hikes for mid/senior management. Strong execution over last three quarters was driven by improved utilization, which at 85% is at its all-time high. With little juice left to squeeze out from this lever, INFO has moved its focus on improving onsite/offshore mix and roll ratios onsite, and fresher hiring onsite to support its cost structure. INFO still maintained guidance of 23-25% EBIT margin.
- APA boosts PAT: PAT of INR51b included an exceptional reversal of income tax expense provision of USD225m, pertaining to previous periods and no longer required due to conclusion of an Advance Pricing Agreement (APA) with US IRS. Excluding the one-off, PAT stood at INR37b (-0.8% QoQ; v/s est. of INR35.3b, -5.4% QoQ). Consequent to the agreement, INFO's overall effective tax rate is likely to fall 100bp up till FY21, driving minor upgrades.
Infosys is a global technology services company based in India. Co. provides business consulting, technology, engineering and outsourcing services. Co.'s end-to-end business solutions include: Consulting and Systems Integration - consulting, enterprise solutions, systems integration and advanced technologies; Business IT Services - application development and maintenance, independent validation services, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management; and Products, business platforms and solutions, including Finacle™, which addresses core banking, mobile banking and e-banking needs of banks worldwide.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.