Infosys’ shares surged over 8% to a record high in intra-day trading on Monday after the software services exporter’s strong guidance for 2016-17 fiscal. Analysts believe the guidance coming on top of good last fiscal growth, suggest it’s getting back its bellwether tag and the stock valuations could regrate over the next 12-months.
The Bangalore-based company has estimated a US Dollar revenue growth of 11.8-13.8% in the current financial year ending March 31, 2017, which is higher than the 10-12% industry growth estimate by Nasscom.
In the year ended March 2016, Infosys reported a revenue growth of 9.1% to $9.5 billion, which was much higher than the 5.6% growth it had posted in 2014-15.
Govind Agarwal of Prabhudas Lilladher believes that the company could repeat the above-industry growth feat in FY17, as revenue visibility is high with 45% year-on-year increase in FY16 order bookings at $2.8 billion.
“Infosys is set for industry leading growth in the medium-term, margin improvement can be a significant earnings boost in FY18/19; all this could drive multi-quarter earnings upgrade,” he said.
Over the last few years, Infosys has played a catch up game with its rivals like Tata Consultancy Services. But, with Infosys delivering growth ahead of the industry, it is expected to trade at a premium to its rivals. TCS will report its quarterly earnings later on Monday evening.
“We believe Infosys will be the fastest growing Indian IT vendor over FY16-18 (13.3% compounded revenue growth; 13.5% compounded EPS growth). Valuations have rerated; however, we believe that they will continue to rerate,” said Sandeep Muthangi, of IIFL.
Market expects the company to drive market share gains via aggressive pricing strategies, to offset some of the pricing pressures that the software services industry is witnessing.
“We remain reassured on growth outperformance of Infosys versus peers, as seen in improved performance in segments like BFSI (banking, financial services and insurance), suggesting it is regaining lost market share; improved traction in clients and deal flow indicating initiatives to improve sales efficiency are bearing fruit,” said Ashwin Mehta of Nomura.
Infosys stock hit a 52-week high of Rs 1,267.90 on the BSE and was trading at Rs 1,247.25, up 6.4% in afternoon trade.