Buy Infosys; target Rs 3080: Prabhudas Lilladher

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Buy Infosys; target Rs 3080: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Infosys has recommended buy rating on the stock with a target price of Rs 3,080 in its January 12, 2012 research report.

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Prabhudas Lilladher is bullish on Infosys has recommended buy rating on the stock with a target price of Rs 3,080 in its January 12, 2012 research report.

"Infosys' Q3FY12 performance was in line with our/consensus expectations. But, a disappointing Q4FY12 guidance was consistent with the commentaries from global tech majors. However, we believe that the recovery in the US would translate in tech-spending with a lag. We expect Q4FY12 to be a trough performance. We don't expect consensus to cut FY13 growth expectation, which is already in low-to-mid-teens."

"Infosys' revenue guidance of flat Q4FY12 in USD terms served as a negative surprise. However, we believe that improving economic outlook from the US would translate into better-than-expected tech spending in CY12. A delay in project kick-off resulted in an anaemic performance. We expect growth to return as the cloud of uncertainty around European crisis clears. The growth in Europe (@cc 16.8% QoQ) from new clients was an encouraging sign. The management is not anticipating those delayed projects to kick-off in FY12. We expect volumes in FY13 to be at 2-4% QoQ, as deferred projects start to kick-off. Infosys added 49 new clients in the quarter, with six F500/G1000 clients. Two large deals from Europe are encouraging and indicate that investment in Europe is working well."

"Infosys has given 20k fresher offer for FY13 and 20% more fresher hiring could be done just-intime, likely to have 70-30 fresher-to-lateral mix. We see a hiring guidance of ~33-38k for FY13, yielding in 10-13% YoY USD revenue growth guidance. Lower utilization and no supply-side constraints could help them deal with some positive surprise. We tweaked our model with lower volume growth. We revise our USD revenue by 0.5% and 2.2% downward with lower margin by 29bps and 13bps for FY12 and FY13, respectively. We expect FY13 momentum to improve as uncertainty clears. We retain 'BUY' rating, with target price of Rs 3,080, 18x FY13e earnings estimates," says Prabhudas Lilladher research report.

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