Sell Infosys; target of Rs 1150: Dolat Capital
Dolat Capital’s research report on Infosys
USD revenue grew 1.8% QoQ tad below our estimates; 0.6% QoQ in CC terms. EBIT margin remained flat QoQ at 24.2% despite negative impact of wage hike offset by operational efficiencies. INFO slashes its revenue guidance to 6%-8% (CC terms) which translates into a CAGR of 1.6%-2.3% over four quarters. The management has lowered its EBIT margin guidance in the range of 22%-24% for FY19 as compared to 23%-25% for FY18 due to investment in digital services.
This further increases the EBIT margin gap vs TCS and hence we believe INFO will continue to trade at a discount vs TCS (10%). INFO is trading at fair valuations of 15.8x/14.6x based on FY19/FY20 earnings given its muted earnings CAGR of 5%(FY18-21E). We maintain our SELL rating with Jun’19 TP of ` 1,150 based on 14.5x FY20 earnings.
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