Infosys up 7%; brokerages tell how to price Murthy factor
Narayana Murthy‘s leadership is likely to improve execution at Infosys, but this could take 6-9 months to be reflected in reported financials. With Murthy‘s addition to the leadership team, the bottom for the stock is now behind it
June 03, 2013 / 14:01 IST
Infosys shares were up 7 percent to Rs 2574 in early trade Monday, as market has cheered the return of founder Narayana Murthy to the company in an excutive role.
While Murthy's presence at Infosys may improve sentiment for the stock near term, he has an uphill task ahead and it could be a while before the company gets back on the path to recovery, feel analysts tracking the stock. Barring a couple of brokerages, most have retained their ratings and target price for the stock.Here is how brokerages are rating the company post the announcement Saturday. Goldman Sachs *Return of Murthy to an executive role after seven years may boost long-term investors’ confidence in the company. *However, given lower IT growth and a more intense competitive landscape, we will wait to see how Infosy changes its strategy to return to a growth path.*We continue to believe that Infy’’s earnings visibility will remain poor in the near term as it faces growth/margin trade-off amid modest IT spending *We forecast 8 percent USD revenue CAGR in FY13-15E (vs. 16 percent for TCS) and a decline in FY14E EPS driven by a loss in revenue market share, pricing pressure in its Application Maintenance and Development (AD&M) business, and a 250bp EBIT decline.*Maintain Neutral and 12-month target of Rs2,380.Morgan Stanley*We maintain our Overweight rating on Infosys. *Murthy’s leadership is likely to improve execution at Infosys, but this could take 6-9 months to be reflected in reported financials.
With Murthy’s addition to the leadership team, the bottom for the stock is now behind it.*This news could be a material driver for Infosys’s stock price in the near term*We believe Murthy could also help Infosys better navigate the uncertainty around US immigration issues.Deutsche Bank*Murthy's 'second inning’ at Infosys will likely be a lot more challenging − particularly since (a) he has been away from the executive responsibilities of the company for the last seven years and (b) the company’s problems are structural rather than mere quarterly stumbles.
Murthy’s return will boost employee morale and investor sentiment in the short term.*We reiterate a Hold rating on Infosys with a target price of Rs 2,175.Macquarie*Positive news-flow but no guarantee for success*12-month price target: Rs 1,990.00Merrill Lynch*We raise our target PE to 16x our FY15E PE, at 10 percent discount to TCS from current 30 percent and raise target price to Rs 2,850 (from Rs2350) in anticipation of possible upside risk to earnings.*Much needed impetus in strengthening customer connect & (2) lowering employee attrition risk on improved morale. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
