Infosys Q3: What Analysts Made Of Infosys Earnings And Clean Chit To CEO

Analysts retained their targets for Infosys Ltd. as its earnings for the quarter ended December beat estimates and the company’s board found no merit in the whistleblower allegations of accounting malpractices by the firm or its executives.

The board’s audit committee which conducted the investigations with help of legal counsel Amarchand Mangaldas and audit firm PwC found no evidence of financial impropriety or misconduct on the part of Salil Parekh, chief executive officer; and Nilanjan Roy, chief financial officer.

India’s second-largest software service exporter also increased its full year revenue guidance after profit beat estimates and margin expanded in the third quarter.

Here’s what analysts said:

Ambit Capital

• Maintained ‘Buy’ with a price target at Rs 825, implying a potential upside of 11.5 percent from Friday’s closing price.
• As event risk reduces, valuation discount for Infosys could narrow.
• Earnings were in line with expectations.
• Strong digital growth, higher net new deals proportionate positive.
• Attrition rate fell.
• Growth in banking and financial vertical was weak.

BofA Securities

• Maintained ‘Buy’ with a price target at 825, implying a potential upside of 11.5 percent from Friday’s closing price.
• Revised FY20 guidance ahead of expectations.
• Net income was ahead of expectations, aided by lower taxes.
• Investments and margin recovery to pat off in future.
• No evidence of financial impropriety or executive misconduct is a positive.

Credit Suisse

• Retained ‘Underperform’ with a price target at Rs 720, implying a potential downside of 2.7 percent from Friday’s closing price.
• A small miss in operational performance was against expectations.
• Organic revenue growth was the lowest in six quarters.
• Large deal wins worth $1.8 billion were the slowest in seven quarters.
• Revenue guidance upgrade not a major positive since already priced in.

Morgan Stanley

• Retained ‘Equal-Weight’ with a price target at Rs 800, implying a potential upside of 8.1 percent from Friday’s closing price.
• Large deal wins at $1.8 billion strong.
• Earnings in line with expectations.
• Values the company at 17.5 times its estimated earnings in FY21.

Edelweiss

• Maintained ‘Buy’ with a price target at 959, implying a potential upside of 29.6 percent from Friday’s closing price.
• Unrelenting digital momentum drives growth.
• Margin levers in place, to expand structurally.
• Could see the valuation gap between Tata Consultancy Services Ltd. and Infosys narrow.