Infosys rallies 3% after Q3 show; Look what top brokerages say
Most brokerages are not giving up on Infosys even as the technology major saw a 30 per cent drop in its December quarter net profit.It approved a Rs 8,260-crore share buyback on Friday -- the second in less than 13 months.The scrip jumped over 3 per cent to Rs 704.90 early on Monday while the benchmark Sensex came off 178 points, or 0.49 per cent, to 35,831.The IT major’s net profit declined to Rs 3,610 crore in October-December against Rs 5,129 crore in the same quarter last year. The company, however, raised its revenue growth forecast for 2018-19 to 8.5-9 per cent in constant currency terms, from 6-8 per cent previously. Revenue from operations rose 20.3 per cent to Rs 21,400 crore.Infosys said it will buy back 10.32 crore shares, or 2.36 per cent, for no more than Rs 800 per share -- 17 per cent higher than the closing price of Rs 683.70 on Friday on the BSE.This is the second share buyback in the company's history -- the first being in December 2017. A company can hold a share repurchase programme only once a year.Infosys showed stronger momentum in the dollar-denominated revenue than larger peer Tata Consultancy Services for the December quarter in reported as well as constant currency (CC) terms. Operating margin though fell significantly by 110 basis points to 22.6 per cent following adjustments pertaining to the fair values of Panaya and Skava, the two divisions that Infosys is in the process of selling. Here’s what the brokerages said about Infosys post its Q3 numbers.JPMorganJPMorgan maintained ‘overweight’ on Infosys with a target price of Rs 750, saying margins need to be watched. “We expect Infosys to narrow the P/E gap with TCS,” the brokerage house said. Credit SuisseThe global brokerage firm maintained ‘neutral’ on Infosys with a target price of Rs 680. “Infosys revenue momentum is clearly improving,” Credit Suisse said adding that the momentum has been at the expense of margins and the current valuation gap may reduce somewhat with TCS.MacquarieMacquarie retained ‘Outperform’ rating on TCS with a target price of Rs 770. The global brokerage house believes that the upgrade of FY19E revenue guidance is a key positive in the quarterly numbers. However, margin pick-up is unlikely in the near term. The financial services firm marginally slashed target price for Infosys to Rs 770, from Rs 775 earlier.CLSAInfosys reported stellar revenue growth with a small miss on the margin front, according to CLSA. The global brokerage believes that constructive capital return policy would keep the stock attractive. CLSA retained ‘buy’ on Infosys with a target price of Rs 930. SharekhanThe brokerage maintains ‘buy’ on Infosys with a target price of Rs 840. “We have tweaked our earnings estimates for FY2019E, FY2020E and FY2021E, factoring in lower-than-expected margin that is being largely offset with increased revenue guidance in FY2019E and improving business visibility. With robust TCV signings and improving business visibility, we believe that Infosys is gradually catching up in revenue growth with TCS,” Sharekhan said. The brokerage house believes that the discount with TCS will gradually reduce, going forward.