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MOSL: Morning India (17/April/17)-1. Infosys; 2. DCB Bank; 3. Capital Goods; 4. PC Jeweller

​MOrning India (17/April/17): 1. Infosys; 2. DCB Bank; 3. Capital Goods; 4. PC Jeweller

Today’s top research idea

Infosys: Dent to hopes of BFSI-led immediate recovery

4Q exit fails to enthuse, again: INFO's CC revenue was flat, as against our estimate of +1% QoQ. The weak exit has led to guidance of 6.5-8.5% YoY CC growth for FY18, implying a CQGR of 2.2-3.0% v/s 1.4% CC CQGR in FY17.

Cuts margin band by 1pp: 4Q EBIT margin contraction of 40bp QoQ to 24.6% is in line with our estimate. Benefits from cross-currency movement were more than offset by reduced pricing. INFO's revised margin guidance of 23-25% is weighed upon by recent INR appreciation and potential investments to augment onsite presence in US to mitigate any regulatory adversities.

Joining the payout bandwagon: INFO changed its capital allocation policy from paying out 50% of PAT to 70% of FCF. This is not a material change, as the FY17 payout was 63% of FCF (50% of PAT), and an increase to 70% would imply payout of 55% (of PAT).

Limited triggers in near term: The stock trades at 14.4/13.1x FY18/19 earnings. Our FY17-19 CC revenue/USD revenue/EPS CAGR stands at 8.4/8.2/6.3%. Our target price of INR1,200 (17x FY19 earnings).