Infosys share price may rise 17% going forward - experts explain why you should buy now

Post Q1FY20 result announcement, IT-major Infosys share price has been positive, but there has been very little increase in valuation. On Tuesday, the share was trading at Rs 783.75 per piece up by 0.55%. However, the company also touched an intraday high and low of Rs 787.90 per piece and Rs 774.80 per piece respectively. Infosys posted its Q1FY20 result, reporting a rise of 5.3% in net profit at Rs 3,802 crore compared to Rs 3,612 crore a year ago in the same period. Meanwhile, the company's revenue grew by 14% in Indian rupees, 10.6% in USD on yearly basis while constant-currency revenue increased by 12.4% in the quarter. 

Guess what! One can still continue to buy Infosys shares, as it is seen rising by a whopping 17% ahead. Sandip Agarwal, Pranav Kshatriya and Abhishek Pathak, analysts at Edelweiss Securities said, "Infosys reported strong revenue growth led by communications and energy & utilities, which grew by 22.6% and 17.7% (YoY, cc) respectively. Financial services and retail, which were soft last quarter, delivered robust growth of 11.3% and 6.9%, respectively .Our belief in the strength of the underlying demand is vindicated by the upward revision in FY20 revenue guidance to 8.5–10% YoY (7.5–9.5% outlined in Q4FY19). Given blistering digital growth (41.9% YoY), Infosys is in pole position to achieve the upper end of its stronger guidance for FY20 in our view."

On the other hand, the trio also added, "While margins are negatively impacted by wage hikes and visa costs, they are offset by the improvement in realisations. Besides, margin pressure would largely ease off with the proportion of digital rising and deployment of trained resources leading to decline in sub-contracting costs, thereby paving the way for stronger-than-expected earnings growth in our view."

Considering above, the Edelweiss Securities' analysts said, "We maintain Infosys as our top pick based on its: 1) unrelenting deal-win momentum— USD2.7bn in Q1FY20; 2) digital-focused strategy; and 3) undemanding valuation. We remain bullish on the IT sector in general, and root for Infosys as it leads the way. Maintain ‘BUY/SO’ with a revised TP of INR923."

The key highlight of the result was the revenue forecast for upcoming quarters, which raises faith in the company. As an investor, one can still buy the shares of Infosys. However, growth may be limited. Hence, near-term funds can be hedged. 

While announcing Q1FY20 result, Salil Parekh, CEO and MD, said, “We had a strong start to FY 20 with constant currency growth accelerating to 12.4% on year over year basis and digital revenue growth of 41.9%. This was achieved through our consistent client focus and investments which have strengthened our client relationships."