Dolat Capital is bullish on Infosys and has recommended buy rating on the stock with a target price of Rs 3,300 in its October 12, 2011 research report.
“Infosys reported its Q2 FY12 numbers with an 8.2% QoQ topline growth at Rs 80.9bn (4.5% in USD terms) - in line with our estimates. Growth was largely volume driven (up 4.5% QoQ) and marginal gains on pricing by 0.5%. Revenues in constant currency grew 5% QoQ. The guidance for Q3 FY12 implies a sequential growth of 3.2-5.3% in USD revenues QoQ. It has decreased its FY12 revenue guidance by 0.9% to 17.1-19.1% (earlier 18-20%). However, EPS guidance has increased significantly to Rs 143-145, well ahead of earlier guidance of Rs 130.”
“Operating profits grew 16.9% QoQ as rupee depreciation supported realisation gains of over 120bps on profitability. The company has improved its profitability guidance and now expects a 50-100bps decline for FY12 over the previous year. The margin decline will account for 150bps gain of forex (rupee depreciated by 380bps in FY12), 80bps decline owing to lower utilisation for the year (200bps over FY11) and 110bps negative impact of salary hike as the entire cost hike ws not covered by the 20% growth in topline. The commentary on business confidence is fine and is well supported by strong new client wins at 45. Nineteen of these have been from the investment areas (healthcare, utilities) and thus suggest traction in new client hunting efforts. We have raised our EPS estimates marginally by 2% for FY12 and expect higher upgrade by the street, considering the lower consensus estimates prior to results. We maintain our positive view on the stock based on attractive valuations of 16x of FY13E earnings and believe the stock will outperform the sector in view of its underweight holding, economical valuation and strong financial performance.”
“We remain positive on the stock based on improved margin expectancy and sustained business confidence in the commentary. We believe the marginal decline in topline guidance will not impact sentiments. But the strong guidance uptick in rupee terms to Rs 145 will help some earnings upgrade (consensus EPS estimates at Rs 135). We maintain our positive view on the stock based on attractive valuations of 16x of FY13E earnings and believe can outperform the sector in view of its underweight holding, economical valuation, strong earnings. We maintain our Buy rating with a target price of Rs 3,300 at 20x FY13E earnings,” says Dolat Capital research report.
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