Buy Infosys, target Rs 800: HDFC Securities

HDFC Securities has a buy call on Infosys with a target price of Rs 800.

The current market price of Infosys is Rs 696.40.

Time period given by the brokerage is one year when Infosys price can reach the defined target.


View of the brokerage on the company:
We maintain our positive outlook on INFY based on (1) Strong and broad-based deal win trajectory (USD 2bn in 2Q – highest ever), (2) Strong performance in Core verticals (BFSI/Retail at 5.8/5.9 per cent QoQ) and acceleration in Manufacturing and Hi-tech verticals, (3) Digital-led growth (31 per cent of rev) at 13.5/33 per cent QoQ/YoY CC, and (4) Stability in large accounts (fastest growth in top-10 acs in 12-qtrs).

We lower earnings estimate by nearly 2 per cent on margin re-set factoring higher sub-contracting cost and accelerated onsite investments.

Expect rev/EPS CAGR of 9.2/11.7 per cent over FY18-21E factoring USD rev growth at 7.6/9.8/10.1 per cent and EBIT per cent at 24.3/24.9/25.1 per cent for FY19/20/21E, respectively.

Growth estimate imply CQGR of 2.1 per cent/2.2/2.2 per cent for FY19/20/21E. Maintain 'Buy' with target price of Rs 800, 18x Sep-20E-EPS.

Near-term outlook: 3Q to be impacted by furloughs, transition impact of large projects. Management maintained the revenue growth guidance and margin guidance for FY19E at 6-8 per cent YoY CC and 22 to 24 per cent, respectively. Announcement of USD 1.4bn one-time payout (dividend/buyback) will support valuations.