Shares of IT major Infosys surged after the company raised its revenue growth guidance for the Apr-Jun quarter of FY20. Today, in the early trading, Infosys shares soared 6 per cent to Rs 770 per share after it opened at Rs 762 per share against the last close of Rs 727 per share. It increased its revenue forecast to 8.5-10 per cent in constant currency terms from 7.5-9.5 per cent pegged earlier. The Bengaluru-based company reported 5.2 per cent growth in consolidated net profit to Rs 3,802 crore for Q1FY20. Infosys has also maintained an operating margin guidance range of 21 per cent - 23 per cent for FY20. Taking stock of the strong earnings for Apr-Jun, Sameer Kalra, Founder and Research Head at Target Investing has maintained a BUY call on the stock.
“We have a positive stance and a BUY on the company. The cash return to investors is communicated in a straight manner and the results show the investments by new management are reaping benefits,” Sameer Kalra of Target Investing told Financial Express Online.
However, ICICI Securities has maintained ADD rating on the stock with a revised target price of Rs 785 per share from the earlier target price of Rs 780 per share based on 19x FY21E EPS (earning per share). Weaker than expected execution in margins, lower than expected total contract value of deal wins, weakness in discretionary spends and the currency appreciation are the key risks to the brokerage’s call, ICICI Securities said in a report.
“Sticky attrition (QA of 23.4% and 21.5% for consolidated and standalone operations though partly driven by higher involuntary in Q1) is at odds with a pick-up in growth especially in digital services and compensation interventions but should moderate with higher onsite opportunities to help,” ICICI Securities added.
Meanwhile, Reliance Securities has retained a HOLD rating on Infosys with a slightly revised target price of Rs 790 from the earlier target price of Rs 780 per share on marginal earnings upgrades. Higher cash returns will provide support to the stock. The stock currently trades at 16.8X FY21E EPS, according to its report.