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CMP: ₹1,132.80
Target: ₹1,220
Infosys 4QFY18 results were a mixed bag. Revenues at $2,805 million were up 1.8 per cent q-o-q and marginally below our estimates (PL estimate: $2,824 million). Constant currency growth for the quarter stood at 0.6 per cent below our estimates (PL estimate: 1.5 per cent cc growth). EBIT margin came at 24.7 per cent up 40 bps q-o-q and above our estimates (PL estimate: 24.6 per cent).
PAT for the quarter came at ₹3,690 crore marginally below our estimates owing to lower other income (PL estimate: ₹3,740). Among verticals, BFSI vertical revenues were up 0.1 per cent q-o-q in constant currency and Retail &CPG vertical revenues were down 0.7 per cent q-o-q in constant currency. Among Geographies, North America revenues were up 0.1 per cent q-o-q in constant currency and revenues from Europe were down 0.2 per cent q-o-q in constant currency. Absence of growth uptick in BFS (excluding Insurance) and Retail &CPG vertical which together account to 39 per cent of total revenues is a concern. Tepid growth in developed markets is also a concern. Insourcing by select North American banks and disruption of Traditional retailers owing to online retailers (Amazon) is weighing on growth in these verticals.
Retain target price at ₹1,220/share (16x FY20E EPS vs 15.5x FY20 EPS earlier) and maintain ‘buy’.
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