Buy Infinite Comp; target of Rs 206: SPA Research

SPA Research is bullish on Infinite Computer Solutions India and has recommended buy rating on the stock with a target of Rs 206 in its August 14, 2012 research report.

"Infinite Computers Q1FY13 revenues came in higher than expected at $58.9mn (SPAe: $57.4mn). The jump in revenue was on the back of higher contribution from Top-5 clients in the Telecom and Mobility space. EBITDA Margins also improved by 150bps to 16.8% on the back of INR depreciation, partially offset by wage hikes. We expect the strong growth momentum to continue in the future thus recommending BUY with a Target Price of INR 206.0"

"Infinite's Q1FY13 revenue of INR 3,191.9mn recorded a 19.6%sequential growth. The growth was on the back of strong volume growth of 9.4% and pricing improvement (3% onsite and 5%offshore). The company added 3 new clients to take the active clients total to 58. It graduated 1 more client to  $5mn revenue contribution category, which now stands at 11 (up 40% YoY).The company has signed 4 major deals in the telecom, healthcare and mobility segment with a revenue contribution expected to be $20mn to $25mn per year over the next 5 years. In Q1FY13 itself the company recorded strong growth from US (up 14.7%), Telecom& Media (29.9%), ADM (16.7%) and PES & IP leveraged (14.2%) business. On the other hand, Europe (-76.9%), Retail (-32.3%) and Energy & Utilities (-16.8%) dragged the growth down,"

"Infinite's management continues to guide towards a 20% US revenue growth and 30% INR revenue growth for FY13. It has also guided for a 16% operating margins (lower by 130bps to FY12 margins of 17.3% due to higher investments). It has guided for an INR PAT growth of 20% in FY13. We expect the company to able to meet the upper end of the revenue growth guidance and exceed its operating margin guidance due to significant INR depreciation tailwind,"

"With a strong Q1FY13 numbers, infinite has vindicated our stand of 21%/25% USD revenue growth and 16.8%/17.6% operating margin levels in FY13E/FY14E, resulting in an EPS CAGR of 17.3% over FY12-14E. Hence on the back of strong deal flow led revenue growth and IP led margin expansion, we continue to recommend BUY for Infinite with a 2-year Target Price of INR 206.0 based on .5x FY14E earnings," says SPA Research report.

Shares held by Financial Institutions/Banks

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More