Sustain above 1168-1200, Target May Be 1315-1405, Otherwise Expect Some Corrections Up To 1050-932
Market Is Expecting Q2FY16 PAT At Rs.3244 cr (7% Sequential Growth) & QEPS 14.55
CMP: 1167
Buy >1168 OR on dips around 1140
TGT: 1200-1225-1285 (T+5)
TGT:1315-1405 (3-12M)
TSL<1125
Note: Consecutive closing below 1125 for any reason. Infy may fall up to 1088-1048-996-960-932 area, where it can be again accumulated, depending upon the news flow (earnings result & guidance) for better buying average (investment purpose).
Some Key points ahead of Infy result :
Infy will publish its Q2FY16 result tomorrow and historically its very important for our market sentiment. Although analysts are not expecting any great turnaround for Q2 corporate earnings as a whole (average earning growth around 5% YOY), any positive surprise could spark a rally in the market.
Market is expecting Infy to deliver a strong Q2 result as traditionally Q2 is the best quarter for IT companies. Recent management commentary about some of its key verticals like manufacturing, retail, BFSI is quite encouraging. Infy is also planning to enter big into infrastructure management services and digital areas (automation) as par its recent CLSA Hong Kong conference.
Although there is favorable impact for recent INR depreciation, absence any significant increase in wage/visa cost, but higher provisioning for variable pay outs, pricing pressure overseas and some cross currency headwinds (AUD) may keep its margin expansion within a narrow band.
Full effect of its various acquisitions may reflect in Q3 onward. Large deal wins and CEO's own office attention for its top 10 priority clients may also reflect in the result in the coming days.
No doubt, under new CEO (Vishal Sikka), Infy is able to turnaround quite convincingly for the last one year and both employees, clients and investors of the company has regained trust & confidence on the company.
Apart from result, revenue growth and guidance, the market will keenly watch:
Business & client spending trends in US & EU, as together this contributes around 85% of Infy's revenue.
Management commentary on oil & gas sector as some of its rivals are projecting a pick up in spending by global oil giants in the days ahead (crude oil may hover around 50-70 $ in FY-16).
Performance of top 10 accountants/clients of Infy.
Infy's ability for swift absorption of next generation technology (Artificial Intelligence-AI, Automation & digital) and proper utilization of its huge cash reserve for acquisition of companies/start ups in these field of AI.
Management commentary of H2FY16 performance as traditionally its also a weak quarter for IT companies, including Infy.
Thus looking ahead, with improving macros of global economy amid easy monetary stance, specially in EU & US and along with that "Digital India" thrust, major IT companies having excellent management and strong balance sheet are ideal for portfolio investments at every major dips and Infy might be one of them.
Recently, Infy wins a major Govt IT project for pan India GST implementation along with some other companies.
There is great potential for India to grow significantly in a more "digital" way as its lacks sufficient pan India IT infrastructure and our economy is also suffering historically for that (genesis of unaccounted money for lack of plastic currency). Its a legacy issue for us.
Thus , we may see huge investments by Govt in PPP mode for "Digital India" in the coming years and all major IT companies, including Infy may be the beneficiary of that (Digital India/Made In India/Make India theme).
As par BG metrics, valuations of Infy (in the current market trends):
Present median valuation may be around: 1135 (FY:15)
Projected fair valuations might be around: 1200-1300-1425 (FY:16-18)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | Low | High | Median | 200-DEMA | 10-DEMA |
| INFY | 54.3 | 220.89 | 21.55 | 1107.86 | 1157.13 | 1132.49 | 1048.87 | 1144.24 |
| INFY | 60.5 | 260.45 | 21.55 | 1169.40 | 1221.41 | 1195.40 | 1048.87 | 1144.24 |
| INFY | 71.25 | 305.95 | 21.55 | 1269.04 | 1325.48 | 1297.26 | 1048.87 | 1144.24 |
| INFY | 85.55 | 360.65 | 21.55 | 1390.58 | 1452.42 | 1421.50 | 1048.87 | 1144.24 |
Analytical Charts:
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