Vishal Sikka, the CEO and MD of Infosys said that the company aims to regain its leadership position by mid-next year and is on cue to earn $20 billion revenue by 2020. He further added that the company is looking to acquire innovative startups and hope that such acquisitions will add $1.5 billion to its $20 billion 2020 revenue target.
Infosys Ltd announced a 5% in jump in its net profit for the first quarter ended June 30, 2015 on Tuesday. The stock reacted positively and went up as much as 15% before closing at Rs 1112.65 on the Bombay Stock Exchange's (BSE) Sensex, up 11%.
Vishal Sikka, the CEO and MD of Infosys said that the company aims to regain its leadership position by mid-next year and is on cue to earn $20 billion revenue by 2020. He further added that the company is looking to acquire innovative startups and hope that such acquisitions will add $1.5 billion to its $20 billion 2020 revenue target.
Infosys has already acquired two companies in this calendar year; Panaya for $200 million and Kallidus for $120 million.
What are the brokerages saying about the most-watched IT company in India?
Harit Shah of HDFC Securities has a "buy" call on the stock since July 2014, said, "We are heartened by the broad-based growth; only insurance, telecom and energy are growth-challenged (18.6% of revenues)."
He further said, "Infosys’ solid revenue growth, US$ 688mn deal wins, improved win rates, a culture of approaching RFPs more strategically, traction in the platform business and focus on top accounts (top-10 clients grew 5.7% QoQ) drive our confidence that it can achieve nearly double-digit USD growth in FY16. USD guidance has also been upped to 8.2-9.2% (7.2-8.2% earlier), while CC guidance has been maintained at 10-12%."
Anantha Narayan and Nitin Jain of Credit Suisse said that the company posted a strong quarter and a turnaround is on the right track.
They said, "A key factor that has been tracked for the company has been a pick up in revenue growth which could lead to industry-leading levels. 1Q FY16 revenue growth was quite strong at 4.4% in constant currency, ahead of ours and consensus's expectations."
Shashi Bhushan and Hussain Kagzi of Prabhudas Lilladher said that Infosys is on "the roll again" and gave a "buy" call on the stock with a target price of Rs 1,340 per share.
They said, " We continue to expect the efforts to be translated into results in H2FY16. However, volatility in demand environment and macro challenges could spring negative surprises."
The duo sounded alarm bells on the contracting margins but said that strong growth could resolve the dip in margins. They said, "Q1FY16 EBITDA margin has been the second lowest (after Q2FY14), but we continue to remain optimistic about the company’s ability to retain margin despite continued pricing pressure on traditional services."
IIFL's Rajiv Mehta asked clients to "accumulate" the stock with an upside of 7.5%. He said, "Company is in the process of arresting pricing decline by renewing some of the existing service lines using automation and artificial intelligence for which a large scale employee training program is underway. On account of stronger volume growth and resilient pricing onsite, the IT services revenue mix shifted onsite by 90bps."
Girish Pai of Nirmal Bang said that Infosys an earlier than expected delivery on its turnaround strategy and gave an "accumulate" rating with an upside of 7%.
He said, "There is continued pricing pressure in ‘traditional services’, which form a large component of India’s IT services industry and Infosys’ revenue which the industry/Infosys is trying to fight with ‘automation’. Infosys’ considerable commentary on automation is reflective of the competitive pressures that the sector faces."
Pai wasn't enthused with what other brokerages' view are on the stock and said, "We do not share the street’s view that there is going to be a strong rebound in growth into the mid-teens in FY17 and beyond. We estimate single digit US$ revenue growth for Tier-1 players in aggregate."
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