Q2 Results: Here’s What Analysts Made Of Infosys’ Performance

Most analysts maintained their bullish investment recommendation for Infosys Ltd. as large deal wins led to steady revenue and operating profit growth for the nation’s second-largest software services provider in the quarter ended September.

The company won 13 deals during the quarter with a total contract value at $2.8 billion. Large deal wins in terms of total contract value in first half has been 75 percent higher year-on-year. Net profit of Infosys rose 6.2 percent sequentially to Rs 4,037 crore in the July-September period, according to an exchange filing. Its revenue increased 3.8 percent over the previous quarter to Rs 22,629 crore, and margin expanded after five quarters.

But a lack of upgrade in the upper end of the revenue growth guidance disappointed analysts. The stock is richly valued, and the guidance caps the share’s upside, brokerage UBS said in its research report.

Infosys expects its revenue to grow 9-10 percent in the ongoing financial year against a forecast of 8.5-10 percent earlier.

Here’s what brokerages have to say about Infosys’ second-quarter performance...

HSBC

• Maintains ‘Hold’ with a target price unchanged at Rs 800 apiece.
• In-line with expectations on strong deal wins.
• Disappointing to see no meaningful upgrade on guidance.
• Banking and retail verticals show signs of deceleration.
• Current FY20 valuations remain rich.

UBS

• Remains ‘Neutral’ with target price unchanged at Rs 900 apiece.
• Earnings in line with expectations.
• Lack of revision in guidance caps share’s upside.
• Guidance suggests softer exit growth rate for FY21

Citi

• Maintains ‘Buy’ with target price unchanged at Rs 900 apiece.
• Large deals strong and per expectations.
• BFSI vertical to be affected by seasonality; retail vertical to remain volatile.
• Company continued to deliver in tough macro environment.
• Case for investment in Infosys stronger in relation to TCS.

Macquarie

• Maintains ‘Outperform’ with a target price of Rs 830 a share.
• Guidance below expectations.
• Ex-retail growth was robust and in line with expectations.
• Sees volatility in capital markets.

Investec

• Downgrades to ‘Sell’ from ‘Hold’ and cuts target price to Rs 730 from Rs 745.
• Weak organic revenue growth performance.
• Sustaining margin improvement on decelerating growth trajectory could be challenging.
• Any assumptions on Infosys being insulated from broader industry headwinds would be incorrect.

Kotak Securities

• Maintains ‘Add’ with a target price of Rs 840 apiece.
• Good quarter but with a softer outlook.
• Growth slackens in financial services and retail.
• Company continues to execute well on strategic priorities.
• Difficult to argue for further rerating of multiple.
• Demand environment continues to moderate.