Infosys Ltd. signage is displayed at the entrance to a building at the company’s campus in Electronics City in Bangalore, India. (Photographer: Vivek Prakash/Bloomberg)

What Dalal Street Made Of Infosys’ Third Quarter Earnings

Most brokerages maintained their stance on Infosys Ltd. after its third quarter profit beat street expectations.

Asia’s second-largest software services company posted a 38 percent surge in third-quarter profit on a tax benefit and investments in digital technologies as its new chief executive officer maintained forecasts for slowing sales growth.

Net income was Rs 5,130 crore in the three months ended December, compared with the Rs 3,610 crore average of estimates compiled by Bloomberg. The company booked a $225 million gain, part of a series of tax-provision reversals agreed upon with U.S. tax authorities. Sales rose just 3 percent in the quarter.

Here’s how brokerages reacted to Infosys’s third quarter results:

Credit Suisse

  • Maintained ‘Neutral’ rating; raised target price to Rs 1,100 from Rs 1,000.
  • Previous quarter results were in line, guidance maintained on expected lines.
  • The U.S. and financial services vertical continue to remain soft, but management outlook is positive.
  • Decent growth recovery in retail; no significant pick-up in large deals.
  • Update on the new chief executive officer's strategy only in April.
  • Revise estimates to slightly lower tax rate and adjusting for recent buyback.
  • Valuations are reasonable as stock under-performed in 2017.
  • Do not see any near-term trigger.


  • Maintained ‘Buy’; raised target price to Rs 1,300 from Rs 1,230.
  • Quarterly earnings in line in terms of revenue growth and margins steady.
  • Tax cuts drive up next two financial years’ earnings per share estimates by 2 percent.
  • Client mining stayed strong with solid growth in top clients.
  • Impressive margin performance continues despite hikes and variable pay.
  • New CEO is yet to fully sponsor the strategic direction.
  • Limited gap with peers, stability and improving execution deserves a re-rating.

Kotak Institutional Equities

  • Maintained ‘Add’, with a target price of Rs 1,215.
  • Disappointed with revenue growth but margin was a positive surprise.
  • Focus on execution, stable management team , build and buy decisions can bring Infosys back on track.
  • Promising industry wide setup can accelerate growth rates.
  • Good quarter in retail vertical.
  • Limited the magnitude of damage from leadership attrition a bit better than our expectation.
  • This combined with setup for the next fiscal that appears promising drives 2 percent upgrade to the expected revenue growth estimate.
  • Impressed with margin defense.
  • Infosys has managed through operational efficiencies and incremental through automation resulting in 30 basis increase in their earnings before interest and tax margin assumption.
  • Combined this leads to a 3-4 percent increase in adjusted earnings per share estimate for financial year 2020


  • Upgraded to ‘Buy’ from ‘Hold’; raised target price to Rs 1,265 from Rs 1,010.
  • With new CEO in place expect highest margin levers, high dividend yield and undemanding valuations.
  • Barring BFSI, all other businesses posted modest numbers in a weak quarter.
  • BFSI, retail, digital and Europe outlook strong for 2018.
  • Earlier downgrade was due to management instability.


  • Maintained ‘Outperform’ with a target price of Rs 1250
  • Infosys performance was steady, despite leadership exit at the end of the second quarter
  • Cyclical headwinds (BFSI and retail) should abate
  • Focused leadership should drive convergence of growth with the peers
  • Reported EPS for the current fiscal is up 9.5 percent due to tax write back
  • Adjusted EPS for the period up to March 2020 remains largely unchanged
  • Key positives: Developed market growth and positive outlook for BFSI
  • Key negatives: Retail outlook remains mixed