Maintain ‘buy’ on Infosys, target Rs 1,350

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Published: January 16, 2016 12:07:25 AM

Infosys (INFO’s) 3QFY16 QoQ CC revenue growth was 1.1%, which was strong given muted expectations on the back of furloughs, one-time benefit of 1pp in the previous quarter, and considering TCS’ 0.5% QoQ CC growth.

Infosys (INFO’s) 3QFY16 QoQ CC revenue growth was 1.1%, which was strong given muted expectations on the back of furloughs, one-time benefit of 1pp in the previous quarter, and considering TCS’ 0.5% QoQ CC growth. While India contributed to 42% of the incremental growth, it was a function of ramp up in multiple accounts and not on account of GST deal.

INFO’s 3QFY16 CC USD revenues grew 1.1% QoQ, above our estimate of 1% QoQ decline. Reported USD revenue growth was 0.6% QoQ v/s our estimate of -1.3% QoQ, indicating a -40bp impact due to depreciation of currencies against the USD.In 2Q, there was a one-off revenue addition to the tune of USD23, on account of early fees due to termination of a contract. Excluding the same, revenue growth during the quarter was 2.1% QoQ CC and 1.6% QoQ in USD.

Under the new management, INFO has addressed concerns around growth, margins and attrition. Its contrasts against the remainder of the industry, which continues to grapple with prospects of decelerating growth.

While pricing is a secular concern, growth leaders will be best placed to offset the impact.

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