CLSA has a buy rating on the shares of Infosys with a target price of Rs 1,000. (Image: IE)
After the country’s second largest software services exporter, Infosys recorded a 7% sequential rise in its net profit to Rs 3,726 crore during the July-September quarter, global brokerage firms CLSA and Macquarie have retained buy and outperform rating respectively. CLSA has a buy rating on the shares of Infosys with a target price of Rs 1,000. Infosys shares were trading at Rs 938.2, up by more than 1.2% since the previous close. CLSA says that Infosys had improved margins due to sustained improvement in utilisation. Infosys managed to marginally increase its operating profit margins (OPM) to 24.2% in the second quarter against 24.1% in the first quarter despite wage hikes. This was largely due to operational efficiencies which included its highest ever utilisation level at 84.7% and better offsite to onshore employee mix.
According to CLSA the company is inexpensive at 13 times FY19 earnings. Meanwhile, Macquarie has maintained an outperform rating on the shares with a target price of Rs 1,070. According to the research firm, the valuation gap between Infosys and TCS will begin to narrow down, once clarity emerges on the new CEO. Yesterday, Infosys said that the process of identifying the next CEO and shareholder consultation outreach have been initiated and are progressing well. Finding the right leader is one among the top priorities of Nandan Nilekani. In August this year, Nandan Nilekani said, “We are very confident on the search, we have a large pool of internal and external candidates.” The company has planned a global hunt to recruit the candidate with the right skill sets. Macquarie expects EBIT margin to be in the range of 23-25%.
Infosys on Tuesday lowered its revenue guidance to 5.5-6.5% from 6.5-8.5% for the current fiscal, even as it beat market expectations on the earnings front.Brokerage house Credit Suisse in its note said the revenue growth was slightly below its and street estimates, though the margins were higher than expectations. “Better margins, higher other income and lower tax rate led to 4% earnings beat,” it noted. Notably, Infosys shares have plunged by more than 8% since January, while the BSE Sensex is up by more than 22% in the same period.
