Emkay Global Financial Services is bullish on Infosys and has recommended accumulate rating on the stock with a target price of Rs 2,800 in its October 12, 2011 research report.
“Infosys’ Sep’11 qtr op performance came in line. While rev increased by ~4.5% QoQ( Emkay exp of +5% QoQ), mgns improved by ~200 bps seq( V/s est of ~140 bps increase). Rev growth broad based across clients/verticals. Co has reported improvement in client metrics with increase in no of US$ 20 mn/30 mn/40 mn+ clients. FY12 rev guidance lowered to US$ 7.1-7.2 bn (+17.2-19.2% YoY) on a/c of cross currency. Dec’11 and March’12 qtr imply a strong 5%+ QoQ growth at the upper end. FY12/13E earnings upped by 6/10% to Rs 142/161 aided primarily by lower currency resets to Rs 48/$ for H2FY12/FY13.”
“While Infy’s Sep’11 revenues of US$ 1, 746 mn (+4.5% QoQ, +5% QoQ in constant currency terms) were a tad below est (Emkay est US$ 1.754 mn), margins improved by ~200bps QoQ to 31.1% (V/s expectations of ~140 bps improvement). Despite operational beat, profits at Rs 19.1 bn (+10.6% QoQ) was lower than estimates (Emkay est Rs19.4 bn) on a/c of forex losses of ~Rs330 mn V/s est of forex gains of ~Rs1200 mn. Revenue growth was broad based across verticals/clients, however company reported an improvement in client mining (with a decent increase in no of US$ 20 mn+/30 mn+/40 mn+ client accounts) as well as an increase in no of new clients added (highest in 6 quarters). IT services volume growth was 4.5% QoQ with offshore pricing improving by ~3.5% sequentially in constant currency terms. While headcount addition during the quarter was impressive at ~~8,300, company has retained it’s gross hiring outlook of 45k and has indicated of making ~23k campus offers for FY13 till date. Infosys cut it’s FY12 revenue guidance to US$ 7.1-7.2 bn (+17.1-19.1% YoY, V/s 18-20% earlier and expectations of 17-18%) maintaining it’s back ended volume growth outlook. Company’s confidence on sustaining growth despite the macro weakness is evident from a strong 3.2-5.4% QoQ revenue growth for Dec’11 and an implied 3.3- 5.6% growth for March’11 quarter. We note that earnings raise to ~Rs 143-145 (V/s Rs 128-130 earlier) though aided largely by a lower currency assumption of Rs 48.98/$ was a big surprise and higher than ours (we expected a reset to Rs 134-136) and street expectations.”
“We note that In the recent quarters, Infy’s poor execution has concerned investors/street. We believe that with the realignment behind, Infosys is well placed to get it’s fair share of volume growth and deal wins. Along with that Infosys remains better placed to maintain/improve margins ahead. We highlight that the conservative company which had been guiding for ~300 bps drop in margins at FY12 start is now indicating <100 bps decline in margins for the year. Our FY12/13E earnings stand upgraded by ~6%/10% to Rs 142/161 aided largely by lower currency resets to Rs 48/$ for H2FY12/FY13 (note that every 1% US$/INR change impact earnings by ~1.6% for Infosys). We retain Accumulate on Infosys with a revised March’13 target price of Rs 2,800 (V/s Rs 2.500 earlier),” says Emkay Global Financial Services research report.
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“Infosys’ Sep’11 qtr op performance came in line. While rev increased by ~4.5% QoQ( Emkay exp of +5% QoQ), mgns improved by ~200 bps seq( V/s est of ~140 bps increase). Rev growth broad based across clients/verticals. Co has reported improvement in client metrics with increase in no of US$ 20 mn/30 mn/40 mn+ clients. FY12 rev guidance lowered to US$ 7.1-7.2 bn (+17.2-19.2% YoY) on a/c of cross currency. Dec’11 and March’12 qtr imply a strong 5%+ QoQ growth at the upper end. FY12/13E earnings upped by 6/10% to Rs 142/161 aided primarily by lower currency resets to Rs 48/$ for H2FY12/FY13.”
“While Infy’s Sep’11 revenues of US$ 1, 746 mn (+4.5% QoQ, +5% QoQ in constant currency terms) were a tad below est (Emkay est US$ 1.754 mn), margins improved by ~200bps QoQ to 31.1% (V/s expectations of ~140 bps improvement). Despite operational beat, profits at Rs 19.1 bn (+10.6% QoQ) was lower than estimates (Emkay est Rs19.4 bn) on a/c of forex losses of ~Rs330 mn V/s est of forex gains of ~Rs1200 mn. Revenue growth was broad based across verticals/clients, however company reported an improvement in client mining (with a decent increase in no of US$ 20 mn+/30 mn+/40 mn+ client accounts) as well as an increase in no of new clients added (highest in 6 quarters). IT services volume growth was 4.5% QoQ with offshore pricing improving by ~3.5% sequentially in constant currency terms. While headcount addition during the quarter was impressive at ~~8,300, company has retained it’s gross hiring outlook of 45k and has indicated of making ~23k campus offers for FY13 till date. Infosys cut it’s FY12 revenue guidance to US$ 7.1-7.2 bn (+17.1-19.1% YoY, V/s 18-20% earlier and expectations of 17-18%) maintaining it’s back ended volume growth outlook. Company’s confidence on sustaining growth despite the macro weakness is evident from a strong 3.2-5.4% QoQ revenue growth for Dec’11 and an implied 3.3- 5.6% growth for March’11 quarter. We note that earnings raise to ~Rs 143-145 (V/s Rs 128-130 earlier) though aided largely by a lower currency assumption of Rs 48.98/$ was a big surprise and higher than ours (we expected a reset to Rs 134-136) and street expectations.”
“We note that In the recent quarters, Infy’s poor execution has concerned investors/street. We believe that with the realignment behind, Infosys is well placed to get it’s fair share of volume growth and deal wins. Along with that Infosys remains better placed to maintain/improve margins ahead. We highlight that the conservative company which had been guiding for ~300 bps drop in margins at FY12 start is now indicating <100 bps decline in margins for the year. Our FY12/13E earnings stand upgraded by ~6%/10% to Rs 142/161 aided largely by lower currency resets to Rs 48/$ for H2FY12/FY13 (note that every 1% US$/INR change impact earnings by ~1.6% for Infosys). We retain Accumulate on Infosys with a revised March’13 target price of Rs 2,800 (V/s Rs 2.500 earlier),” says Emkay Global Financial Services research report.
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