Buy Infosys Tech; target of Rs 3690: PINC Research

"Infosys reported below expected revenue and EPS growth. USD revenue grew 1.1%QoQ to USD1,602mn, led by pricing increase of 2.5%QoQ and volume decline of 1.4%QoQ. The operating margin declined 120bpsQoQ. Higher other income supported the PAT which grew 2.1%QoQ to Rs18.18bn (PINCe Rs19.1bn). For FY12, outlook was robust with 18-20%YoY USD revenue growth but a bit conservative on profitability front (EPS guidance of Rs126-128).”

“Revenues grew 2%QoQ to Rs72.5bn tad above their upper guidance of Rs72.3bn (PINCe Rs74.49bn). USD revenue grew 1.1%QoQ lower than upper guidance of 2%. EBIT margin declined 122bpsQoQ to 29% despite rupee depreciation, primarily due to dip in utilisation (420bpsQoQ decline to 68.4%). EPS grew 2%QoQ to Rs31.8 led by higher other income compared to Q3. BFSI was flattish with 35.7% contribution, manufacturing grew 5.2%QoQ and transport & logistics grew strongly 17.9%QoQ on a small base. Telecom was laggard with 3.8%QoQ decline. US was flattish but India grew 24%QoQ. App dev grew 4.3%QoQ much higher than company average. SI and IMS grew 10.1%QoQ and 2.8%QoQ, respectively. The utilisation rate declined and attrition (LTM) was down 50bpsQoQ to 17%. Infosys has added 7 Fortune 500 clients, total count to 155. Overall 620 clients.”

“Infosys plans to hire 45,000(gross adds) in FY12. Deal pipeline is strong with large transformational programs. Q4FY11 performance was marginally below expectations but growth outlook is robust with 18-20%YoY USD revenue growth and 6%CQGR in Q2-Q4FY12. We expect EBIT margin to decline lower than assumed 300bps for FY12. We maintain our ‘BUY’ recommendation with a target price of Rs 3690 based on 21xFY13E earnings,” says PINC Research report.

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