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Geojit
Infosys (Reduce)
CMP: ₹771.45
Target: ₹729
Infosys registered a solid top line growth of 9.8 per cent y-o-y in Q2FY20 (CC growth at 11.4 per cent), largely in-line with consensus estimates. Growth across geographies was led by North America (+11.8 per cent y-o-y) followed by Europe (+10.5 per cent). Among the business segments, Utilities (+17.2 per cent y-o-y) and Communication (+17.1 per cent) led the increases followed by Manufacturing (+15.2 per cent).
Digital revenue represented 38.3 per cent of the total revenue and grew 36.9 per cent y-o-y in Q2FY20. The company reported deal wins worth $2.8 billion which is expected to boost the top line growth momentum going forward. EBIT margin improved to 21.7 per cent in Q2YFY20, fuelled by higher utilisation, better onsite mix and other cost management efforts partially offset by compensation increase.
The company’s efforts to reduce attrition reaped benefits with overall attrition rate reducing to 21.7 per cent in Q2FY20 versus 23.4 per cent in Q1FY20.
We downgrade our rating to REDUCE with a target price of ₹729 based on 18x FY21E adjusted EPS.
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