Post Vishal Sikka, Infosys soars; should you buy?

After the exit of former chief Vishal Sikka, the performance of Infosys has been improving in the investors' minds at least, if not elsewhere. In first few hours of today’s trading session, IT-giant Infosys has turned out to be a star performer despite reporting mixed first quarter results for FY19. Infosys is a top performer on both Sensex and Nifty 50, which was attributed to 3.70% growth recorded in net profit to Rs 3,612 crore in Q1FY19 compared to net profit of Rs 3,483 crore in the corresponding period of the same month. However, net profit logged a decline of 2.11% from Rs 3,690 crore in the preceding quarter. The rise in share price of

Infosys was also despite missing estimates in both bottom-line and top-line terms. 

Infosys revenue from operation came in at Rs 19,128 crore which was higher by 12% from Rs 17,078 crore in Q1FY18 and up by 5.78% from Rs 18,083 crore in Q4FY18. 

A Bloomberg poll of analysts had predicted Infosys revenue and net profit to come in at Rs 19,064 crore and Rs 3,741 crore in Q1FY19 respectively. 

Looks like investors do not care about the prediction and are finding Infosys stock price quite attractive today. At around 11:28 hours, the share price of Infosys was trading at Rs 1,352.75 per piece above Rs 43.65 or 3.33% on BSE. 

However, the share price of Infosys has touched an all-time high of Rs 1,384.40 per piece above which results overall 5.75% gain so far today on BSE. 

Should you invest? 

Apurva Prasad and Amit Chandra analysts at HDFC Securities have maintained a positive outlook on Infosys based on four factors. They are: 

• Rapid acceleration in Digital (USD 3.2bn portfolio growing at 6.1% CQGR) driven by cloud transformation, IoT, cybersecurity, UI-UX projects,
• Improving large deal trajectory (USD 1.1bn TCV in 1Q vs USD 3bn in FY18) and strong large account metrics (four acs added to >USD100mn category),
• Recovery in BFSI ahead (40% of 1Q deal TCV in BFSI), 
• Strong outlook for NorthAm geo across Retail, E&U and BFSI verticals (7 out of 8 large deal wins from NorthAm). 

The duo added, “Revise earnings lower ~1% to reset margin est by -60bps. Expect rev/EPS CAGR of 8.7/9.0% over FY18-20E factoring USD rev growth at 7.7/9.6% and EBIT% at 24.2/24.3% for FY19/20E respectively. Growth est. imply CQGR of 2.6%/2.1% for FY19/20E. Maintain BUY with TP of Rs 1,415, 18x FY20E-EPS.”