Buy Infosys Technologies: Man Financial

Infosys BSE | NSE 13/02/12 Are Mutual Funds betting on Infosys?

Broking house, Man Financial is bullish on Infosys Technologies and has recommneded buy rating on the stock.

Man Financial report on Infosys Technologies:

Guidance reinforces our expectations

Infosys' Q4FY07 results are lower than our estimates (5.7% QoQ) as revenue growth was only 3.2%. Net profits grew sequentially by 16.4%, but it included an extraordinary tax write-back of Rs 1.24 bn. However, the guidance for FY08 remains in line with our expectations, reinforcing our view that Infosys will continue to see strong volume growth going forward.      

Results Highlights

Infosys posted a sequential revenue growth of 3.2% at Rs 37.72 bn. The QoQ volume growth of 3.8% and improved pricing by 1.7% was impacted negatively by the rupee appreciation and lower utilization.

EBITDA margins declined by 99 bps sequentially driven by higher employee costs (56 bps), increased selling expenses (65 bps), despite lower G & A expenses (22 bps)

PAT grew (excluding the extraordinary tax write-back of Rs 1.24 bn) by 3.7% QoQ to Rs 11.44 bn

Client addition remains healthy with a gross addition of 34 clients and a net addition of 12 clients, taking the total number of active clients to 500.

Top-client revenue momentum continues in a strong vein with the top client growing by 27.1% sequentially. The top-5 clients have also registered a 16.3% QoQ growth (versus a degrowth of 4.7% in Q3FY07)

Valuation

Our net profit estimates remain unchanged. However, our earnings estimates have changed by 1.03% to factor in ~ 2.5% equity dilution on account of ESOPs exercised by its employees-and expect Infosys to record earnings per share of Rs 86.5 in FY08E.

At Rs 2088, Infosys trades at 25.4x and 19.1x FY08E and FY09E earnings. We maintain a Buy on the stock.