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MOSL: Morning India (15/July/19): 1. Infosys (Making a case of valuation convergence); 2. IndusInd Bank; 3. Avenue Supermarts; 4. EcoScope; 5. Fund Folio

MOrning India (15/July/19): 1. Infosys (Making a case of valuation convergence); 2. IndusInd Bank; 3. Avenue Supermarts; 4. EcoScope; 5. Fund Folio

 

Today’s top research idea

Infosys: Making a case of valuation convergence

• INFO's 1QFY20 CC revenue growth of 12.4% YoY, EBIT margin of 20.5% (-100bp QoQ) and PAT of INR38b (+5% YoY) were all marginally above estimates. Adding to the sheen of strong deal wins were: (i) revenue growth guidance upgrade to 8.5-10% YoY CC v/s 7.5-9.5% earlier, and (ii) Change in payout policy to pay 85% of FCF v/s 70% earlier.
• We note the contrast in INFO's 1QFY20 performance to that of TCS - where near-term revenue visibility remained suspect and the growth performance was lopsided in favor of two verticals. Given this - and with payouts converged too - the case for narrowing of the valuation gap gets stronger.
• Our price target of INR840 discounts forward earnings by 19x, implying an upside of 15%. Maintain Buy.

Piping hot news

Govt to consider grandfathering 20% tax on share buybacks already underway

The Finance Ministry Friday said that it will look into the applicability of 20 per cent tax proposed in the 2019-20 Budget on the current share buybacks by listed companies. Finance Secretary Subhash Chandra Garg, speaking at a CII event, said the proposed tax on listed companies is aimed at discouraging share buybacks and encouraging investments.