India
NRI
Pick Of the Week – State Bank of India
Every week, we recommend a well-researched fundamental equity investment as our ‘Pick of the Week’. Handpicked after a thorough analysis of the business, industry, and economy, this recommendation has a higher potential of earning good returns over a horizon of 6 - 9 months.
Investment Rationale
May see minimal impact of COVID-19 outbreak: Infosys may see short term impact of COVID-19 outbreak but company can efficiently manage from remote systems to ensure timely delivery of the outsourced business. The COVID impact has been seen majorly on consulting business while outsourcing business still remains robust. Direct exposure to the COVID-19 affected regions and verticals is sub 1% and it has not seen any meaningful delivery disruption either. The large deal TCV data has been very healthy for 9MFY20 at $7.3bn up 56% on YoY basis, which gives comfort to growth in the near term
Digital playbook intact for Infosys even in global lockdown: IT service provider’s engagement with its partner network has expanded beyond certifications into setup of co-innovation centers, building industry solutions, ISV partnerships and joint sourcing of deals. These partnerships play a significant role in implementation, rollouts & upgrades, validation and support services. Recent deal trend continues to be healthy for Infosys and is reflective of traction in Manufacturing/Industrial and Retail & CPG verticals. Infosys also received various digital transformational deals worth more than $1.8bn in recent quarter. We believe that COVID outbreak will create huge opportunity across geographies for Infosys to post strong organic growth across different verticals
Strong revenue growth, healthy deal wins in Q3FY20: Infosys Ltd. reported strong top-line growth and healthy deal wins in Q3FY20. Infosys posted revenue growth of 9.5% on YoY basis and 1.0% on QoQ basis in constant currency terms for the period of Q3FY20. Infosys reported steady deal wins (14 large deals) with a TCV of $1.8bn despite Q3 being a seasonally weak quarter. Operating margins have improved by 22 bps to 21.9% sequentially. The operating margins were in line with the guided range of 21%-23%
We Recommend
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CMP
₹654
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Target Price
₹720
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Potential Upside
10%
* Note: Stock Investment horizon approx. 6-9 months. CMP as on 27th March, 2020.
Please refer the research report disclaimer before making an investment decision.