Buy Infosys; target Rs 3110: Motilal Oswal
Motilal Oswal is bullish on Infosys and has recommended buy rating on the stock with a target price of Rs 3,110 in its January 11, 2013 research report.
January 14, 2013 / 13:44 IST
Motilal Oswal is bullish on Infosys and has recommended buy rating on the stock with a target price of Rs 3,110 in its January 11, 2013 research report.
"Infosys, revenues at INR104.2b (+5.7%), v/s est of INR100.5b, EBIT at 25.7% v/s est of 25%, PAT at INR23.69b v/s est of INR21.4b. Revenue beat was largely driven by 1.8% QoQ increase in productivity (organic) and was helped by ramp-ups getting effected in deals bagged earlier. This was incremental to the situation as in the beginning of December. Total TCV of 8 large outsourcing deals amounted to USD731m and the TCV of orders booked in PPS increased to USD603m from USD485m in the previous quarter. Consequently, organic growth guidance for FY13 was retained at 5% YoY.Margin beat was despite utilization (including trainees) of 70.1%, v/s our est of 220bp QoQ increase to 71.8%, and was driven by: [1] higher-than-expected revenue growth, [2] 1.8% QoQ increase in productivity, [3] healthy revenue growth in Finacle, driving non-linearity and [4] aggressive cost control.We have raised our revenue est by 4.5% for FY14 and 3.1% for FY15. Higher growth is a function of significantly stronger FY13 exit v/s our earlier est. Our EPS est are raised by 4.2% for FY14 and 5.7% for FY15 on the back of higher revenues and 21bp/43bp upward revision in FY14/FY15 EBIT margin est.Utilization is a key margin lever for INFO with the potential margin extraction of up to ~4pp. Improvement in macro in our view will drive margin outperformance relative to peers, given that slack in utilization remains the highest. We are rolling over our TP to FY15E. In view of continued signals of gradual strengthening in business momentum, we are revising our target price upwards to INR3,110, which discounts FY15E EPS by 16x. Maintain Buy," says Motilal Oswal research eport.
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