Buy Infinite Computers; target Rs 168: BP Equities

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Buy Infinite Computers; target Rs 168: BP Equities

BP Equities is bullish on Infinite Computers Solutions (India) and has recommended buy rating on the stock with a target price of Rs 168 in its February 16, 2012 research report.

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BP Equities is bullish on Infinite Computers Solutions (India) and has recommended buy rating on the stock with a target price of Rs 168 in its February 16, 2012 research report.

"Infinite Computers Solutions (India) Ltd., EBITDA margins improved 315 bps q-o-q and 335 bps Y-o-y to 20.0% aided by 11% rupee depreciation, improved pricing (4.7% offshore and 5.3% onsite sequential), higher utilization rate of 90% and improved operational efficiencies. Moreover increased contribution from higher margins IP-Led services and revenue sharing agreements helped improve margins. Going forward we believe utilization to moderate due to fresher's hiring and don't see further margins expansion. Revenue contribution from others verticals which consists of BFSI and (Travel & Transportation) T&T expanded 700 bps to 25.2% in Q3 FY12 primarily due to stronger deal pipe line in BFSI and &T verticals. APDRP contract was expected to contribute Rs 700 mn in Q3 & Q4 FY!2, has been delayed, which in turn impacted revenues and increased DSO days for the company. The company also expects one of its telecom client to ramp up in the coming quarters thus boosting top line."

"We lower our top-line estimate on account of inconsistent realization from APDRP contract and company's inability to maintain a health run rate from existing clients. Our top line estimates for FY12E and FY13E now stand at Rs 10.5 bn and Rs 12.1 bn up 19.3% and 14.9% respectively. We however increase our EPS estimate for FY12E and FY13E EPS on account of rupee depreciation and operational efficiency, which now stand at Rs 31.9 and Rs 35.5 respectively. The stock currently trades at a P/E of 2.8x and 2.5x FY12E and FY13E earnings which we think is at a steep discount to its peers considering its healthy deal pipeline, high cash reserve of Rs 32/share, healthy return ratios and pretty good cash flows generation. We maintain our "BUY" rating on the stock and maintain our target price of Rs 168 an upside of 85% from current levels," says BP Equities research report.

Public holding more than 90% in Indian cos

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To read the full report click on the attachment