Infosys will beat conservative $ guidance: Antique Broking

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Infosys will beat conservative $ guidance: Antique Broking

Calling it a 'strong buy' at the back of Infosys' second quarter results, Sandip Agarwal, IT analyst with Antique Stock Broking says the company has done extremely well for bringing the improvement in the utilization numbers.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about Infosys See interviews with Infosys Management See what other Experts & Brokerages are saying about Infosys See previous Results of Infosys Infosys BSE | NSE 31/05/12 Are Mutual Funds betting on Infosys?

Calling it a 'strong buy' at the back of Infosys ' second quarter results , Sandip Agarwal, IT analyst with Antique Stock Broking says the company has done extremely well for bringing the improvement in the utilization numbers.

Keeping aside the EPS guidance upgrade, which he says will see an upgradation due to the currency factor, Agarwal says the execution side is a big kick. "Overall, the Infosys results are a good set of number on the operating matrix side and the execution side," he says, adding that the stock remains the top pick followed by rival TCS.

Further, he says that the minimal cut in the dollar guidance is because the company is being conservative at this point of time, expecting the IT budgets to be freezed in December. "I expect to see Infosys outdoing the conservative dollar guidance," he adds.

Below is an edited transcript of  Sandip Agarwal's interview to CNBC-V18. Also watch the accompanying video.

Q: What would you do with the Infosys stock now, after a 6% move post the earnings?

A: Infosys has been on track on execution side. I am happy about the utilization number improvement. We were expecting utilization to go up significantly in the last quarter as well, because we believe that a company cannot operate at 73-74% external utilization level and it has done extremely well on that front.

The EPS guidance upgrade is probably more due to the currency factor. However, on the execution side they have done an extremely good job and we should see the operating matrix for IT company because that makes a lot of difference. From here on, I think in the last quarter the attrition levels came down and utilization improved a bit, however, in this quarter they have definitely shown a turnaround in utilization level and this will help them to definitely post good numbers going forward.

Although they have cut the dollar guidance minimally and are being conservative at this point of time because the IT budget will be freezed in December, they will definitely out beat that number as well. So, overall it is a good set of number on the operating matrix side and the execution side.

Q: Going with the Rs 143 to Rs 145 per share, I don't think any of the analysts were working with in terms of earnings per share. How much would you mark EPS on Infosys buy and what do you think the stock could do, in terms of a comfortable price it could trade at?

A: We will have to upgrade our EPS estimates for FY12. We have not worked out the number yet but we will definitely upgrade the number. We have a target price of Rs 3,318.

Q: What did you make out from the management speak? What are the reasons to increase the weight on the stock and lift its rating?

A: We already have a strong buy on the stock and we will maintain that. We have to increase our EPS number in light with the new guidance. We remain bullish on the stock and we believe that in last 10 years the growth in Indian IT has been more of a market share shift from the MNC players to the Indian players. And, it will continue to happen because there is around 60% price differential between per hour rate of MNC's and Indian IT companies.

There is a lot of room for market share shift. In recessionary scenario and worse macro conditions, it actually increases at a fast pace. So, there could be a pain for a quarter or two in future but after that again the growth will be very phenomenal. Hence, we remain bullish on the industry altogther.

Q: Q3 and Q4 are traditionally weaker for Infosys. So, what is it that you are factoring in in, in terms of volume growth for the next two quarters?

A: We are taking a volume growth of around 3.5-4% for Q3 and another 4.5-5% for Q4.

Q: What is your rating now on Infosys versus TCS?

A: We still have Infosys as our top pick and then followed by TCS.

Q: The company is saying Rs143-145 but what is your EPS estimate for the full year?

A: We earlier had an EPS estimate of Rs 136 and we have to rework our numbers. I think we will have to work that.