Apr 13, 2012 10:16 AM IST | Source: CNBC-TV18

Quick takes: Here's what you can do with Infosys today

Goldman Sachs recommends buying Infosys with a target of Rs 3180. Investors will mainly focus on the FY13 guidance today and expect the company to provide a FY13 dollar revenue growth guidance of 11-14%.

Following are the brokerage calls on Infosys

Goldman Sachs recommends buying Infosys with a target of Rs 3,180. Investors will mainly focus on the FY13 guidance today and expect the company to provide a FY13 dollar revenue growth guidance of 11-14%. A wide range may be given to account for the near-term uncertainty regarding budget allocations.
UBS is neutral on Infosys with a target of Rs 3,250. While FY13 guidance is likely to be in line with current expectations, revenue guidance of 14% or more would be necessary to act as an upside trigger for the stock.

This is what experts had to say.

Nilesh, MD & CEO at Envision Capital says, “This is going to be a very important earnings season from Infosys and a technology sector perspective. It’s probably a year where we are entering into with a fair bit of caution. The street has virtually no expectations from Infosys in terms of the guidance.”

He further adds, “If I were to look at it over the years, this is probably the year where the expectations are probably the most modest. The street is expecting no more than 14-15% guidance growth, which Infosys management is likely to provide.”

Nilesh says, “In that context probably the company will end up guiding something like 14-15% growth in both revenues and the earnings per share, which is also getting reflected in the stock price because if you really look at it from valuations perspective the stock is really not trading at any kind of meaningful premium to the market. Even if you were to take that band of Rs 165-170 as EPS guidance for next year, which ends up at being at something around 16 times current year earnings which is relatively low from an Infosys perspective.”

This time around the expectations are extremely low and if for some reason the company guides something better than 14-15% then I think that could positively surprise the street, says Nilesh.

Dipan Mehta, Member BSE and NSE says, "The management will give kind of forecast which is in line with street expectations. That is a best case scenario. But by and large Infosys results and the guidance have become a bit of a non event. I heard you say before also that it is no longer the flag bearer for the IT industry as well."

He adds, "There are several more companies which are the favorites with the investors. If you see over the past 12 months or so I think most of the other IT companies led by the midcap IT stocks like Hexaware, Oracle or may be Polaris, NIIT Tech - all these companies have done significantly better than large cap IT."

Dipan says, "One needs to keep in mind that in terms of investor expectations as well as investor weightage, they keep on changing from time to time and the favorite for these stocks keeps on changing. If 2-3 years ago it was Infosys then TCS came back into reckoning and then it was HCL Tech and now Wipro has been touted as the outperformer. So these numbers keep on changing in terms of the favorite on the list."

From a future perspective, Dipan suggests, "May be 12-18 months down the line Infosys may come back into reckoning because per se that strategy is what we really appreciate. They are trying to move up their value chain focus and focus more on consulting and that’s bit of a long term strategy and it will take some time before the returns are shown."

Explaining the impact of Infosys result on the stock martkets, Dipan Mehta says, "By and large I feel that this event will be a non event. In fact I would be so bold as to say that even if there are some negative news flows coming in from Infosys, the market has the capacity to absorb it. As we have seen right throughout March, where whatever could go wrong has gone wrong and still we are trying to scale these levels where we are challenging hopefully 5400 in the next two-three trading sessions or so. So long as we have the rally in global markets, I think we can take a lot of disappointment in our stride."

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