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You are here : IndiaNotes >> Research & Analysis >> Companies >> Infosys Ltd. >> Research

Infosys: APA agreement with US to bring down tax rate; Buy

Motilal Oswal | 10 Jan, 2018  | Follow Author | Add to my Favourites 
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The Development: Infosys (INFO) has announced an Advanced Pricing Agreement(APA) with the US Internal Revenue Service (IRS), under which both companies have agreed on a methodology to allocate revenues and compute taxable income of the company’s US operations. The agreement covers a 10-year period from FY11-21.


          Valuation and view


  • For INFO, we expect USD revenue CAGR of 8% and EPS CAGR of 7.1% over FY17-20E. Lower earnings CAGR is a function of a 90bp decline in profitability and slight strengthening of the INR.

  • However, we do not expect INFO’s performance to lag peers materially, especially after the company having swiftly addressed the heightened issues around governance with the appointment of Mr Nilekani to the Board and Mr Salil Parekh as the CEO.

  • Our price target of INR1,200 discounts forward earnings by 16x, implying an upside of 15%. Maintain Buy


         Link to the PDF



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About Motilal Oswal

Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.

 

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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