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Thursday, 24 November 2016


INFOSYS, India’s second largest IT major with a market cap of Rs. 2236062 Mn returned to its growth momentum with PAT and Income from Operations rising 6% and 11% respectively in Q2 FY17 compared to the same period previous year.  Profit After Tax or Net Profit stood at Rs. 36060 Mn quarter ended 30th September 2016 against Rs. 33980 Mn corresponding September quarter 2015. EBDITA also reported growth of 7% at Rs. 54930 Mn in Q2 FY17 compared to Rs. 51440 Mn in Q2 FY16. September quarter was better than the previous June quarter as PAT, EBDITA rebounded with 5% & 6% growth QOQ. Revenue also grew 3% QOQ at Rs. 173100 Mn against Rs. 167820 Mn in the previous June quarter. Except Manufacturing & Life Sc, Healthcare, Insurance, all other business segments grew in double digits. Energy & Utility Communication Services led the pack with 16% jump YOY at Rs. 38640 Mn against Rs. 33360 Mn same period previous year. Volume growth is 4% during the quarter and high performer attrition rate is down to 8.90%. Operating margins have improved 80 basis points QOQ through efficient utilization of workforce, reduction in subcontractor costs and onsite employee cost. Though the company is struggling to consolidate its position in the present volatile slow growth scenario especially in US & Europe which contribute 61.50% & 22.50% respectively of its revenues, it is on the path of maintaining sustainable growth which might be considered low compared to its financial performance in the previous few years. Global uncertainty has heightened and protectionism is the current theme which started with BREXIT. Indian IT Industry is facing the brunt due to uncertain global regulatory changes, increase in wage bill, pricing pressure and low discretionary IT spending world over. Infosys will take all these challenges head on with its highly credible management, stable margins, zero debt, high operating cash flow, improving bottom line and thus is still a force to reckon with.

·       Net Profit Margin is seen at 21.28% X FY 17E and 21.74% x FY18E respectively. EPS is seen at 63.32 x FY17E and 68.57 x FY18E respectively. At CMP of Rs.977.30, PE ratio for the bank is seen at 15.44 x FY17E and 14.25 x FY18E respectively. P/B for the Bank is seen at 2.93 x FY17E and 2.67 x FY18E respectively. Thus we recommend BUY for the stock for medium and long term at a target price of Rs. 1250.

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