Hold Infosys; target Rs 2945: R K Global

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Hold Infosys; target Rs 2945: R K Global

R K Global has maintained hold rating on Infosys with a target price of Rs 2945 in its January 12, 2012 research report.

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R K Global has maintained hold rating on Infosys with a target price of Rs 2945 in its January 12, 2012 research report.

"Infosys reported ~31% YoY & ~15% QoQ (better than our expected numbers, at ~22% YoY & ~7% QoQ) in the third quarter of FY'12 but, in fact, leaving aside the dramatic decline in the INR, the third quarter's results would have been close to our projected numbers. The company disappointed with its USD revenue guidance (~16-17% growth; EPS at ~Rs 42) for Q4FY'12 and cumulatively for FY'12, stating myriad global business outlook, but we don't think it is going to have a significant impact ahead."

"The company reported a very robust Q3FY'12 performance, solely over depreciating INR. The company's revenue for the quarter stood at Rs 92,980 mn (USD 1,806 mn, ~3.4% in reported currency terms & ~4.4% in constant currency terms), up by ~31% YoY & ~15% QoQ. The company's PAT stood at Rs 23,720 mn, up by ~33% YoY, in comparison to our forecast of ~22% growth. Infosys's overall looked rosy this Q as the company maintained good client additions. The company has added one of the largest numbers of clients this quarter, 49 new clients have been added and six of them are in Fortune 500. Infosys's revenue productivity has gone up again this quarter by ~0.8%. If we look at YoY, Infosys's revenue productivity is up by ~5%. That means even in a very tough environment the company has been able to maintain the quality of revenue, aided by blended pricing at ~0.8%. On 9M basis, Infosys's revenue productivity has gone up by ~6%."

"The company's EBIDTA grew by ~34% and maintained margins at ~31% (matched our margins expectation) over INR dep. As Infosys's margins benefitted by ~4% in the period, where INR depreciated by ~11%. Moreover, the company also benefitted from operations on SEZ that reduced the tax liability by ~13%. Infosys's utilization remains at ~76%, leaves enough rooms of opportunity, considering new client contracts. We believe that FY'13E will bring much better performance that FY'12E, over global IT spends improvement as EU & US improves, aided by APAC. At CMP, Infosys trades at a P/E & P/BVPS of ~13.6x & BVPS of ~4.0x of FY'13E EPS of Rs 191 and Rs 651. We re-iterate HOLD, re-affirming on our earlier TP of Rs 2,945 (with an upside potential of ~12% from current levels), factored over P/E** & P/BVPS*** of ~15.5x and ~4.5x of FY'13E EPS of Rs 191 and Rs 651," says R K Global research report.

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