Buy Infosys; target of Rs 3125: Nirmal Bang

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Buy Infosys; target of Rs 3125: Nirmal Bang

Nirmal Bang is bullish on Infosys and has recommended buy rating on the stock with a target of Rs 3125 in its January 12, 2012 research report.

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Nirmal Bang is bullish on Infosys and has recommended buy rating on the stock with a target of Rs 3125 in its January 12, 2012 research report.

"Infosys' 3QFY12 results on the revenue, margin and profit fronts were above our expectations led by rupee depreciation. However, given the subdued guidance for 4QFY12, the stock witnessed an 8.4% battering on the bourses today. Our estimates already factor in a reasonable 11.3% US dollar revenue growth in FY13. As per our house view, owing to a deteriorating external account, the rupee is likely to depreciate further in FY13 and we factor in an average rupee-dollar rate of 54.5 for FY13. We maintain our stance that Infosys is likely to be a key beneficiary of a weak rupee owing to lower hedged positions, with valuations at 14.1x FY13E EPS reasonable."

"Infosys reported a 14.8% QoQ increase in 3QFY12 revenue to Rs93bn (our estimate Rs91bn, consensus Rs91.5bn); in dollar terms, revenues came in at US$1,806mn, ahead of our estimate of US$1,785mn, with volumes growing 3.1% QoQ, nearly in line with our estimate of 3.2% QoQ. Pricing was stable (our estimate 1% QoQ decline), which is a positive in a quarter that saw cross-currency headwinds. The IT major's key verticals - financial services and insurance (FSI) and manufacturing (MFG) - grew 3.1% and 4.8% QoQ, respectively, in dollar terms, another positive sign in a seasonally weak quarter. The IT major reported a 268bps QoQ rise in margins to 33.7%, above our estimate by 95bps and consensus estimate by 89bps. This was driven by rupee depreciation, which led net profit to rise 24.4% QoQ to Rs23.7bn (against our estimate of Rs22.2bn and consensus estimates of Rs22.6bn)."

"Infosys' stock took an 8.4% hit today on cautious 4QFY12 guidance. However, in our view, the caution was expected in the wake of delays in finalisation of IT budgets. We believe our FY13 dollar revenue growth estimate of 11.3% adequately factors in slower growth owing to the uncertain economic outlook. Also, as per our house view, the rupee is likely to remain weak owing to a worsening external account, which will boost FY13 EPS. We maintain our Buy rating on the stock with a TP of Rs 3125," says Nirmal Bang research report.

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