Infosys up further as brokerages upgrade ratings, forecast
Infosys shares extended gains on Monday, rising over 4 percent, after a 17 percent increase on Friday, as several brokerages upgraded the stock and raised their earnings expectations on the back of a better-than-expected third quarter.
January 14, 2013 / 18:51 IST
Moneycontrol Bureau
Infosys shares extended gains on Monday, rising over 4 percent, after a 17 percent increase on Friday, as several brokerages upgraded the stock and raised their earnings expectations on the back of a better-than-expected third quarter.The India's second lartest software services exporter, which has had a string of disappointments over the last few quarters, reported a consolidated net profit of Rs 2,369 crore, higher than analysts' expectation of Rs 2,255 crore, while revenue growth at Rs 10,424 crore was also ahead of street forecast of Rs 10,090 crore.It also maintained its full year organic growth guidance, contrary to a cut expected by analysts.Also Read: Analysts see TCS Q3 profit down 3% to Rs 3,410 croreCLSA, Barclays and JP Morgan, all upgraded the stock to "outperform" and "overweight" respectively.Citigroup raised its FY2013-2015 earnings per share estimates on Infosys by 1-2 percent. It also raised its target price on the stock to Rs 3,035 from Rs 2,710, while maintaining a "buy" on the stock."Q3 (was) meaningfully above expectations, finally...We believe Q3 is the first big step for rerating of Infosys. A directional pickup looks likely given (a) good deal wins over past two quarters; (b) our CIO survey suggesting market share gains for Infy; (c) likely pickup in IT spends due to pent-up demand. While one more strong quarter will increase conviction, data points are there," said Surendra Goyal and Rishi Iyer of Citigroup.Other analysts too are bullish on the stock. "With commentary turning positive after eight quarters and an increasing win rate in Q3, Q4 expectations look realistic. We see Infosys continuing to benefit: i) from improving Oracle / SAP license sales into FY2014 through its services business along with higher than company average growth rates from Lodestone; ii) large deal traction in IMS and consulting aiding the commodity as well as high value portion of business," Nitin Padmanabhan and Soumitra Chatterjee of Portugese investment bank Espirito Santo said.The Espirito analysts have a "buy" on the stock and feel despite the surge post results, there is further room for upside.Kim Eng has raised its FY2014 revenue and EPS estimates for Infosys by 4.6 percent and 4.8 percent respectively."Infosys delivered strong QoQ growth, the highest in the past 4 quarters and has secured 8 large contracts in Q3 in a challenging environment. While not at the same rate, but we expect QoQ growth in revenue to be sustainable, versus QoQ decline in first half, driven by strong demand for software services from banking and financial services and the energy and utilities sectors," it said.Kotak Securities - Private Clients Research too raised its earnings estimates on Infosys and now expects volumes to increase 11 percent year-on-year, profit after tax around Rs 101 billion and EPS at around Rs 177 in FY2014.However, it recommends investors "reduce" Infosys shares citing limited upside from current price."We remain positive on the medium-to-long term strategy of the company. However, the stock has moved up significantly post the announcement of results," said Kotak analyst Dipen Shah.Credit Suisse analysts, on the other hand, have largely maintained their EPS estimates on Infosys and have a "neutral" rating on the stock."On paper, Infosys is best leveraged to any pick-up in IT spending in 2013 given its large bench, exposure to discretionary projects and the stock's underperformance in 2012. However, organisational uncertainties and increasing flexibility in deal constructs prevent us from getting constructive...Its relative valuations to TCS and HCL Tech are a lot less attractive," said Credit Suisse analysts Anantha Narayan and Sagar Rastogi. Infosys shares were at Rs 2,791, up near 3 percent in noon trade on NSE.Nachiket Kelkar
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