Buy Infosys, target of Rs 3,250: Prabhudas Lilladher

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Prabhudas Lilladher has come out with a research report on Infosys Technologies . The firm has upgraded Infosys to buy from accumulate and revised the target price to Rs 3,250.

The report says, "According to the management, IT budget is expected to be flat with a positive bias. The management, though, was positively surprised by the final outcome of the IT budget since they last spoke about it in the quarterly result. We believe that the current momentum in the strong demand would help the company to deliver revenue growth in mid single-digit in the US dollar term. We expect the company to take a conservative stance for the guidance of FY11 and guide a growth of 10-12%."

"Infosys has got the smallest exposure to Europe as compared to its peers and ~90% of that is from UK. The company is unfazed by trouble in Europe and hence, not witnessing any weakening in deals pipe-line. The company continues to ramp-up team with local hires in its European operation as they hired CEO for Germany and in the process to hire one for France,"  according to Prabhudas Lilladher report.

The report also says, "The management was optimistic as the deal pipeline has improved over the last quarters. The company gained due to vendor consolidation and continues to see good traction in large business transformational deals. According to our channel check, the company is in the process of winning one large contract from leading telecom players in New Zealand (NZ) and two contracts on cloud computing in the range of US$70-80m. Australia and NZ contributes about 5% of total revenue and continues to deliver strong growth opportunities."

"We continue to remain optimistic about improved demand environment for Indian IT Services, wherein the Tier-1 company would be benefitted. We rollover our model to FY12 and revise the target price to Rs 3,250, a target multiple of 24x FY12e. We upgrade Infosys to buy from accumulate."

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To read the full report click on the attachment