Q1 jitters hit Infosys stock, but analysts see up to 30% potential upside
Dalal Street experts still see value in Infosys stock post a 9 per cent battering on Friday after the IT major reported a 4.47 per cent fall in its sequential net profit in the June quarter.
- Jul 18, 2016,
- Updated Jul 18, 2016 3:15 PM IST
Was it too early to glorify the turnaround story of Infosys under the supervision of protagonist Vishal Sikka? Not really, believe brokerages.
The Dalal Street experts still see value in Infosys stock post a 9 per cent battering on Friday after the IT major reported a 4.47 per cent fall in its sequential net profit in the June quarter. They believe the stock can still notch up to 30 per cent from its current market price. The scrip is trading at Rs 1059.50 in Monday's trade.
In the last 13 quarters, only twice the Infosys stock has fallen on the result day. The steepest fall it logged was in the March quarter of fiscal year 2013, when the stock tumbled nearly 22 per cent. In the March quarter of FY15, the stock witnessed a 6 per cent plunge, otherwise Infosys has always offered positive returns (see table) on its D-day on the Dalal Street.
June quarter results
The IT giant reported 4.47 per cent fall in consolidated net profit at Rs 3,436 crore in the June quarter of fiscal year 2016-17 against Rs 3597 crore in the March quarter of fiscal year 2015-16.
Infosys had reported Rs 3028 crore net profit in the corresponding quarter a year ago.
In the constant currency terms, the company grew 1.7 per cent, which was the slowest Q1 growth since FY13. Also, it disappointed with FY17 revenue growth guidance cut to 10.5-12 per cent from 11.5-13.5 per cent.
Margin came in better than peers
Company did a good job on the margin front, in-line with analysts' expectations. On the operating front, EBDITA and EBIT margins dipped by 121 bps QoQ bps and 138 bps QoQ respectively to end the period at 26.5 per cent and 24.1 per cent respectively, impacted adversely by wage increments and lower revenue growth, but these numbers are better than the peer group.
What brokerages say
Overall disappointment in revenue and guidance led to a sharp reaction in stock price on Friday; however brokerage Prabhudas Liladhar believes the company will lead sector growth in FY17 as well.
"After a initial disappointment, we believe street will look at the positives in the results which are CC YoY growth of 10.9 per cent, EBIT margins up 10 bps YoY and dollae EBIT growth of 11.3 per cent YoY. These numbers are better than the peer group, said the brokerage.
Prabhudas views stock correction as a buying opportunity and retained 'buy' on the stock. Broking firm Angel Broking also maintained 'buy' rating on the stock with a target price of Rs 1,374, an upside potential of nearly 30 per cent.
Emkay Global Financial Services recommended 'hold' on the stock with a target price of Rs 1,240.
Was it too early to glorify the turnaround story of Infosys under the supervision of protagonist Vishal Sikka? Not really, believe brokerages.
The Dalal Street experts still see value in Infosys stock post a 9 per cent battering on Friday after the IT major reported a 4.47 per cent fall in its sequential net profit in the June quarter. They believe the stock can still notch up to 30 per cent from its current market price. The scrip is trading at Rs 1059.50 in Monday's trade.
In the last 13 quarters, only twice the Infosys stock has fallen on the result day. The steepest fall it logged was in the March quarter of fiscal year 2013, when the stock tumbled nearly 22 per cent. In the March quarter of FY15, the stock witnessed a 6 per cent plunge, otherwise Infosys has always offered positive returns (see table) on its D-day on the Dalal Street.
June quarter results
The IT giant reported 4.47 per cent fall in consolidated net profit at Rs 3,436 crore in the June quarter of fiscal year 2016-17 against Rs 3597 crore in the March quarter of fiscal year 2015-16.
Infosys had reported Rs 3028 crore net profit in the corresponding quarter a year ago.
In the constant currency terms, the company grew 1.7 per cent, which was the slowest Q1 growth since FY13. Also, it disappointed with FY17 revenue growth guidance cut to 10.5-12 per cent from 11.5-13.5 per cent.
Margin came in better than peers
Company did a good job on the margin front, in-line with analysts' expectations. On the operating front, EBDITA and EBIT margins dipped by 121 bps QoQ bps and 138 bps QoQ respectively to end the period at 26.5 per cent and 24.1 per cent respectively, impacted adversely by wage increments and lower revenue growth, but these numbers are better than the peer group.
What brokerages say
Overall disappointment in revenue and guidance led to a sharp reaction in stock price on Friday; however brokerage Prabhudas Liladhar believes the company will lead sector growth in FY17 as well.
"After a initial disappointment, we believe street will look at the positives in the results which are CC YoY growth of 10.9 per cent, EBIT margins up 10 bps YoY and dollae EBIT growth of 11.3 per cent YoY. These numbers are better than the peer group, said the brokerage.
Prabhudas views stock correction as a buying opportunity and retained 'buy' on the stock. Broking firm Angel Broking also maintained 'buy' rating on the stock with a target price of Rs 1,374, an upside potential of nearly 30 per cent.
Emkay Global Financial Services recommended 'hold' on the stock with a target price of Rs 1,240.