Infosys Q4 result was in line on revenues, though above our expectations on margins (driven by rupee depreciation and cuts in sub-contractor costs). The FY17F revenues growth guidance was a tad ahead of our expectations at 11.5-13.5% in CC terms (vs est. of 11-13%). Post results, our FY16-18F expectations of USD revenues/EPS CAGR of 12/11% are largely unchanged, though we remain reassured on growth outperformance vs peers, as seen in: Improved performance in segments like ADM/BFSI, suggesting it is regaining lost market share; Improved traction in both top 10 and non-top 10 clients; Inherent strength in consulting and system integration (visible in divergence versus TCS) driving better growth; Strong exit growth of 13.3% y-o-y in Q4 (vs 8% y-o-y for TCS) positioning it well for FY17F growth outperformance. In addition, tight operational control and increased aggression in the market are heartening signs. Retain ‘buy’.
Infosys reported Q4 CC revenue growth of 1.9% q-o-q (vs est. of 2%), while being ahead on EBIT margins up 60bps q-o-q to 25.5% (vs est. of 24.6%).
Our revenue and EPS estimates are largely unchanged. Our TP rises to Rs 1,315 (prev. Rs 1,270), based on 18x 1-year forward EPS up to Mar 18F of R73. We continue to believe that Infosys should trade at a premium to TCS, given better growth and prefer HCLT/INFO within Tier 1 IT.