Infosys shares soar to all-time intraday high on June quarter earnings report
Infosys has retained its FY19 guidance for revenue growth in range of 6-8% in constant currency terms
Mumbai: Shares of Infosys Ltd rose as much as 5.75% on Monday to hit an all-time high of ₹1,384.40 in intraday trading, after the firm’s June quarter earnings release on Friday.
Infosys shares ended the day up 1.83% at ₹1,333.05, while the benchmark Sensex index closed 0.60% lower at 36,323.77 points.
The IT services firm has retained its FY19 guidance for revenue growth in the range of 6-8% in constant currency terms. The guidance implies a required compound quarterly growth rate (CQGR) of 1.8-2.5%, which is higher than 1.6% achieved in FY18, said analysts.
Some brokerages have tweaked their target prices for Infosys shares. Out of 52 analysts covering the stock, 40 have a “buy” rating, eight have a “hold” rating, while four have a “sell” rating, shows Bloomberg data.
Analysts said although it looks like Infosys will achieve the lower end of its guidance in FY19, the margin band is conservative with the share of digital inching up, recent rupee depreciation and investments already defined internally.
With a buy rating, Motilal Oswal Securities Ltd expects Infosys to grow revenue by 6.6% and 8.6% in FY19 and FY20 respectively, which is a downward revision in their estimate by 0.8 percentage point.
“While Infosys met expectations on margins in Q1FY19 and is currently at the top end of its guidance band, it has been clear about its plan to invest in the business. Its investments have been identified and so has the quantum, hence leading to potential benefits out of any rupee depreciation that’s already been factored in by the company. We therefore maintain our view of the company achieving the top end of its margin guidance for the year, followed by expansion in FY20,” it said in a report on 13 July.
ICICI Securities revised its target price on Infosys to ₹1,405 from ₹1,415 but stated that revenue decline in the financial services vertical of 0.2% quarter-on-quarter in constant currency terms and high attrition of 23% on a quarterly annualized basis were the key negatives in the June quarter results.
“Attrition was elevated even for high performers which is concerning especially given their importance for ensuring superior delivery quality and solutioning and for sustaining CSAT levels. Spends are expected to recover in the financial services vertical from Q2FY19 itself with the vertical contributing 40% of deal TCV in the quarter,” it said in a report on 14 July.
Prabhudas Lilladher Pvt. Ltd has also raised its target price on Infosys by 3% to ₹1,430 per share. Due to cross-currency headwinds and Q1 dollar revenue miss, the brokerage firm has trimmed its dollar revenue growth assumptions to 7.2% and 8.5% for FY19 and FY20.
Maintaining a “reduce” rating, Nomura said Infosys Q1 revenue growth was a tad below the Bloomberg consensus expectation and does not provide a reason to change its view that growth could be towards the lower end of its guided band.
“We believe consensus expectations of growth towards higher end of the range could temper and the stock post a material run-up of 27% year-to-date should take a breather,” it said in a note on 13 July. It also added that slowing of revenue growth in communications vertical was a negative but retail growth uptick was a positive and mirrored similar trends seen at TCS.
“The sustainability of this trend is key to watch given structural challenges in this segment,” Nomura said.
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