Why Infosys stock is among the top Sensex, Nifty gainers today after 30% fall in Q3 net profit

The Infosys stock rose in trade today after the IT firm raised its revenue growth guidance for 2018-19.  The large cap stock opened with a gain of 3.26% and rose 3.70% to an  intra day high of 709 level. The stock has been gaining for the last four days and risen 4.42% during the period.  It has gained 29.34% during the last one year.

The stock is trading below its 50-day and 200 day moving averages of 667.96 and 682.60, respectively.

Why Infosys stock is among the top Sensex, Nifty gainers today after 30% fall in Q3 net profit

37 of 44 brokerages rate the stock “buy” or ‘outperform’, 10 “hold”  two underperform, according to analysts’ recommendations tracked by Reuters.

The stock is among the top Sensex, Nifty gainers today.

The IT firm on Friday missed street estimate in terms of net profit.  It reported a 30 per cent drop in its December quarter net profit to Rs 3,610 crore during the December 2018 quarter compared to the net profit of Rs 5,129 crore in the October-December 2017 quarter.

The Bengaluru-based firm’s revenue, grew 20.3 per cent to Rs 21,400 crore in the December 2018 quarter as compared to Rs 17,794 crore in the year-ago period.

The board of the company approved a buyback of equity shares from the open market route amounting up to Rs 8,260 crore (about $1.18 billion) at a price not exceeding Rs 800 per share.

The IT firm also announced a special dividend of Rs 4 per share that would result in a payout of about Rs 2,107 crore (approximately $302 million).

The company has revised upwards its FY2018-19 revenue guidance in constant currency to 8.5-9 per cent, it said. “With increased client relevance, we saw double digit (10.1 per cent) year-on-year growth in Q3 on a constant currency basis,” Infosys CEO and MD Salil Parekh said.

Sanjeev Hota, AVP Research at Sharekhan by BNP Paribas said Infosys’ performance surprised positively with strong top-line growth for the quarter, though margin performance missed the mark.

“Increase in revenue guidance and better exit rate for FY19 provides comfort on double digit growth in FY20. Buyback quantum seems to be below than expectation, however, will support the stock performance in medium term,” he added.

Meanwhile, brokerages are positive on the prospects of the stock after Q3 earnings.

CLSA has given a buy call on Infosys with a target price of Rs 930. Growth acceleration, capital return and demand recovery merit re-rating margin miss, adjusted margin in middle of its guided range beat revenue estimates sharply. The brokerage raised its revenue forecast by 1-2% and cut margin estimates by 30-50 bps.

HSBC has retained buy call on the stock with a target price of Rs 880. Revenue strong in Q3 AND guidance reinforces our positive view. Cost pressure may lead to better pricing in a stable currency environment. Infosys remains HSBC’s top pick in the sector.

Macquarie has given a target price of Rs 770 on the stock. The surprise and upgrade of FY19 and revenue guidance are positive from Q3. Margin pick-up is unlikely in the near-term. Investments, ramp-up of large deals and wage corrections may cap margin pick-up.  The firm is progressing on right path to ensure revenue acceleration, the brokerage said.

source: businesstoday