Reduce Infosys, says Ventura

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Ventura is bearish on Infosys and has recommended reduce rating on the stock in its April 12, 2013 research report.
 
“Infosys gave an annual dollar revenue growth guidance of 6-10  percent for FY14E, which is well below the market and Nasscom expectations. Infosys board recommended a final dividend of Rs 27 per share and has put forth a decision to set aside US  USD100 mn for investment in products, platforms and solutions ideas in line with Infosys 3.0 strategy. Currently at a CMP of Rs 2295, the stock is quoting at 13.0x and 11.8x its estimated earnings for FY14E and FY15E. While much of the damage is done we still believe that the stock could tank further albeit at a lower pace as markets adjust the PE to reflect the benign outlook and mediocre Q4FY13 performance. We recommend a REDUCE on the stock.”
 
“The Q4FY13 earnings of Infosys were to the dismay of the market as they missed their revenue and earnings guidance by a mile. Both revenue and earnings declared were below street expectations and the guidance given was far below everyone’s imagination. It is little wonder that the stock retreated or shall we say collapsed by a huge +20 percent post the result declaration. Infosys’s revenue grew by 18 percent in Q4FY13 to Rs 10,454 crore YoY with a consolidated net profit of Rs 2,394 crore which was up by 3.4 percent YoY (+ 1.05  percent QoQ). EBIT margins sharply declined by 213 bps on account of onsite wage hikes and lower utilisation. While much of the damage is done we still believe that the stock could tank further albeit at a lower pace as the markets adjust the PE to reflect the benign outlook and mediocre Q4FY13 performance. We recommend a REDUCE on the stock,” says Ventura research report.

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