Time & Price action indicates that Infy (CMP: 1182) has to sustain above 1195-1210 for 1240-1250 and only consecutive closing above 1260-1285 area, it may rally further towards 1315-1400 zone in the near term.
On the flip side, sustain below 1170-1135 area, it may fall towards 1120-1100-1090 & 1055-1030-1010 zone in the short to mid term.
Trading Idea: Infy
CMP: 1182
Either sell below 1195-1210 or on rise around 1250-1260;
TGT: 1135*-1090-1055-1010*-975-930 (1-3/6M)
TSL> 1285
Note: Consecutive closing (3 days) above 1285 for any reason, Infy may further rally up to 1315-1352*-1400 & 1660 in the short to long term (alternative bullish case scenario).
* Q4FY16 Result Update on 15/04/2016:
Overall Q4 result of Infy is slightly above street expectations, but in USD term, its at par with the estimates and the $ revenue is slightly below consensus. Q1FY17 guidance by the management is also slightly above analyst's expectations.
Consolidated Q4FY16 result summary:
The above result summary shows that the "surprise" element (wrt to consensus) for PAT & EPS is around 1% & 0% in INR and USD terms.
OPM and NPM contracted by 0.22% & 1.36% (YOY-INR) and 0.98% & 1.28% (YOY-USD); but QOQ it saw some improvement/at par.
Having said that, Infy's continuous NPM above 20-21% may be above industry (NASCOM) trend and almost all analysts are very enthusiastic about it.
Looking forward, higher visa & employee costs (salary increase by around 9% & 2% for on/off site jobs and more thrust on US employees for North America) may be some of the headwinds for Infy.
Also, there will be some cross currency volatility (GBP for Brexit issue) and USD ( Fed confusion), which may affect the earnings in the quarters ahead. BPO business may also face tough competition from nimbler digital technologies, such as analytics/mobile/cloud computing in the near future.
But increasing thrust on cloud computing, automation, AI, digital technology (smart & predictive analytics) and some acquisitions & strategic collaboration with leading technology providers in the industry is putting Infy on the forefront of Indian IT companies.
Also, Finacle is now a major brand in banking software and various banks/MFI are gradually transforming into it on a global scale.
Though growth is lacklustre in North America, in India, there is vast opportunity, thanks to "Digital India" initiative by the Govt (Infy already won a major contract for GST network; but it will all depend up on the actual implementation of GST to convert into real earnings).
In Q4FY16, favourable INR (depreciated) and operational efficiency helped Infy to a great extent despite some pricing pressure.
No doubt, Infy is a great portfolio stock, but considering the recent price action, new life time high will again come only sustaining above 1260-1285 zone for 1352-1400 area; otherwise sustaining below 1195-1135 area, it may fall again to 1090-1010 zone (profit booking may emerge as the good Q4FY16 result may be already priced in to a great extent after Infy revised its guidance after Q3FY16).
Considering the favourable risk reward ratio, portfolio buying from lower zone (1090-1010) may work good rather than chasing the stock on rally.
For Infy (Consolidated Basis):
Q4FY16 TTM EPS: 59.02 (FY-16)
Projected FWD EPS: 65.25 - 72.15 - 79.85 (FY:17-19)
Average PE: 20
As par BG metrics and current market scenario:
Present median valuation of Infy may be around: 1165 (FY:16/TTM)
Projected fair value might be around: 1225-1290-1355 (FY:17-19/FWD)
* Q4FY16 Result Update on 15/04/2016:
Overall Q4 result of Infy is slightly above street expectations, but in USD term, its at par with the estimates and the $ revenue is slightly below consensus. Q1FY17 guidance by the management is also slightly above analyst's expectations.
Consolidated Q4FY16 result summary:
| SCRIP | RESULT | ACTUAL | CONSENSUS | YOY | QOQ | SURPRISE | YOY | QOQ |
| INFY | NET REVENUE | 16550 | 16545 | 13411 | 15902 | 0.03% | 23.41% | 4.07% |
| (INR) | EBITDA | 4220 | 4111 | 3449 | 3959 | 2.65% | 22.35% | 6.59% |
| OPM(%) | 25.50% | 24.85% | 25.72% | 24.90% | 0.65% | -0.22% | 0.60% | |
| PAT | 3597.00 | 3556.00 | 3097.00 | 3465.00 | 1.15% | 16.14% | 3.81% | |
| NPM(%) | 21.73% | 21.49% | 23.09% | 21.79% | 0.24% | -1.36% | -0.06% | |
| EPS | 15.74 | 15.60 | 13.55 | 15.16 | 0.90% | 16.16% | 3.83% |
| SCRIP | RESULT | ACTUAL | CONSENSUS | YOY | QOQ | SURPRISE | YOY | QOQ |
| INFY | NET REVENUE | 2446 | 2454.5 | 2159 | 2407 | -0.35% | 13.29% | 1.62% |
| (USD) | EBITDA | 930 | 930 | 842 | 895 | 0.00% | 10.45% | 3.91% |
| OPM(%) | 38.02% | 37.89% | 39.00% | 37.18% | 0.13% | -0.98% | 0.84% | |
| PAT | 533.00 | 533.00 | 498.00 | 524.00 | 0.00% | 7.03% | 1.72% | |
| NPM(%) | 21.79% | 21.72% | 23.07% | 21.77% | 0.08% | -1.28% | 0.02% | |
| EPS | 0.23 | 0.23 | 0.22 | 0.23 | 0.00% | 4.55% | 0.00% |
The above result summary shows that the "surprise" element (wrt to consensus) for PAT & EPS is around 1% & 0% in INR and USD terms.
OPM and NPM contracted by 0.22% & 1.36% (YOY-INR) and 0.98% & 1.28% (YOY-USD); but QOQ it saw some improvement/at par.
Having said that, Infy's continuous NPM above 20-21% may be above industry (NASCOM) trend and almost all analysts are very enthusiastic about it.
Looking forward, higher visa & employee costs (salary increase by around 9% & 2% for on/off site jobs and more thrust on US employees for North America) may be some of the headwinds for Infy.
Also, there will be some cross currency volatility (GBP for Brexit issue) and USD ( Fed confusion), which may affect the earnings in the quarters ahead. BPO business may also face tough competition from nimbler digital technologies, such as analytics/mobile/cloud computing in the near future.
But increasing thrust on cloud computing, automation, AI, digital technology (smart & predictive analytics) and some acquisitions & strategic collaboration with leading technology providers in the industry is putting Infy on the forefront of Indian IT companies.
Also, Finacle is now a major brand in banking software and various banks/MFI are gradually transforming into it on a global scale.
Though growth is lacklustre in North America, in India, there is vast opportunity, thanks to "Digital India" initiative by the Govt (Infy already won a major contract for GST network; but it will all depend up on the actual implementation of GST to convert into real earnings).
In Q4FY16, favourable INR (depreciated) and operational efficiency helped Infy to a great extent despite some pricing pressure.
No doubt, Infy is a great portfolio stock, but considering the recent price action, new life time high will again come only sustaining above 1260-1285 zone for 1352-1400 area; otherwise sustaining below 1195-1135 area, it may fall again to 1090-1010 zone (profit booking may emerge as the good Q4FY16 result may be already priced in to a great extent after Infy revised its guidance after Q3FY16).
Considering the favourable risk reward ratio, portfolio buying from lower zone (1090-1010) may work good rather than chasing the stock on rally.
For Infy (Consolidated Basis):
Q4FY16 TTM EPS: 59.02 (FY-16)
Projected FWD EPS: 65.25 - 72.15 - 79.85 (FY:17-19)
Average PE: 20
As par BG metrics and current market scenario:
Present median valuation of Infy may be around: 1165 (FY:16/TTM)
Projected fair value might be around: 1225-1290-1355 (FY:17-19/FWD)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | Low | High | Median | 200-DEMA | 10-DEMA |
| INFY | 59.02 | 220.89 | 20 | 1143.75 | 1185.36 | 1164.56 | 1108.24 | 1190.34 |
| INFY | 65.25 | 252.95 | 20 | 1202.60 | 1246.35 | 1224.48 | 1108.24 | 1190.34 |
| INFY | 72.15 | 290.65 | 20 | 1264.59 | 1310.60 | 1287.59 | 1108.24 | 1190.34 |
| INFY | 79.85 | 332.85 | 20 | 1330.36 | 1378.76 | 1354.56 | 1108.24 | 1190.34 |
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