Workmen prepare an electronic screen at the Infosys Ltd. (Photographer: Jason Alden/Bloomberg)

Infosys Hits Record High After Analysts Focus On $1 Billion Contract Wins

Shares of Infosys Ltd. surged to a record high after analysts focused more on the software exporter topping the $1 billion mark in large contract wins during the first quarter even as its net profit for the period lagged estimates.

“Infosys has secured eight large deals with total contract value of $1.1 billion plus, of which around 47 percent is net-new revenue,” IDBI Capital’s analyst Urmil Shah write in note. It was the first time in the past seven quarters that new pacts had topped $1 billion, analysts said.

“The deal is a positive sign,” said Harit Shah, an analyst at Reliance Securities in interaction with BloombergQuint, adding that it is definitely going to improve the sentiment towards the stock and the overall business outlook for Infosys.

Net profit during the April-June quarter declined 2.1 percent quarter-on-quarter to Rs 3,610 crore, according to its stock exchange filing. The profit was impacted by a Rs 270 crore reduction in the fair value of Panaya.

Shares of the software major rose as much as 5 percent to hit an all-time high at Rs 1,384. The stock was the best performer on Sensex and Nifty.

Here's what analysts had to say about Infosys' quarterly earnings:

Morgan Stanley

  • Maintains ‘Overweight’, price target raised to Rs 1,450 from Rs 1,360.
  • Management comments suggests “possible return of growth in the U.S. banking vertical”
  • Investments in business could keep margins between 22-24 percent.

Motilal Oswal

  • Maintained ‘Buy’ with a price target of Rs 1,550.
  • June quarter’s constant currency revenue growth came in-line with estimate
  • Strong growth was seen in energy and manufacturing on a yearly basis.
  • Though guidance retained, expect better margins.
  • Deals and digital are positives; concerned on attrition and BFS sector
  • Infosys will achieve the lower end of its guidance in 2018-19.

Goldman Sachs

  • Maintains ‘Buy’, price target Rs 1,532
  • Large deal wins crossing $1 billion mark after six quarters provides greater visibility on growth.

Jefferies

  • Maintains ‘Buy’, price target raised to Rs 1,485 from Rs 1,340.
  • Improvement in deals, pick up in North America and commentary on BFSI add to a positive outlook.
  • Raise EBIT estimates by 4-5 percent to factor weaker rupee.

BofAML

  • Expectations of growth acceleration remain on back of strong deals and improved outlook in U.S.
  • Expect operating profit to be at top-end of guided range
  • Maintains Buy

Investec

  • Maintained ‘Buy’; raised the price target to Rs 1,440 from Rs 1,320.
  • Margin performance drives upgrades.
  • Commentary suggests better growth going forward.
  • Weakness in BFSI is likely over.
  • Assume marginal narrowing of valuation gap with TCS.

Citi

  • Maintained ‘Neutral’; raised price target to Rs 1,315 from Rs 1,285.
  • June quarter's revenue and EBIT margins were mostly inline.
  • Flattish BFSI and high attrition are key concerns.
  • Large deal flows at over $1 billion is positive for outlook.
  • Stock to be supported by sector sentiments, pending capital return and bonus announcement.

IDBI Capital

  • Maintains ‘Accumulate’, price target Rs 1,386.
  • Only negative in first quarter was another write down on Panaya.
  • Raise FY19/20 earnings estimate by 6.4 percent and 5.9 percent, respectively.