Buy Infosys; target Rs 2900: Emkay
Emkay Global Financial Services is bullish on Infosys and has recommended buy rating on the stock with a target price of Rs 2900 in its June 07, 2013 research report.
June 10, 2013 / 15:46 IST
Emkay's research report on Infosys
"Mr Narayan Murthy's return to the company as Executive Chairman in our view addresses the problem of 'crisis of leadership' afflicting Infosys which has impacted the company's performance adversely over FY11-13. Mr Narayn Murthy remains revered both within and outside the company and under his stewardship , we see several steps in the form of (1) re of camaraderie (media reports talked about some bit of friction within the senior management team in the past), (2) refocussing on sales (channel checks and discussions with several industry players in the past indicated that a lot of sales staff had quit in the company in the past 12-18 months) and (3) improvement in the employee morale and moderation in attrition (Infosys's attritition continued to be high V/s peers in FY13 despite a relatively benign supply side environment). All of the above would essentially mean that the entire company would be pulling in a single direction under Mr Narayan Murthy's leadership unlike in the recent past. This would also mean a significant focus on improving operational performance, something that was the hallmark of Infosys's 'PSPD' model (Predictability, Sustainability, Profitability and Derisking model)""Given that IT Services remains largely a 'People's business' , the success of any player in the sector is a function of the quality of top leadership in the company and more so when the industry is a maturing phase('growth rates slowing down'). Numerous examples exist in the form of 'Infosys of the past', or the 'TCS in it's present form with Mr N Chandrasekaran leading from the front' or even HCL Tech which has emerged as a strong company under the leadership of Mr Vineet Nayar through FY08-12 after missing out on the Y2k bus. In this context it is worth highlighting that TCS's market cap has become 2.4x since the current CEO took over. In a similar vein HCL Tech's market cap has gone up 2.6x since Mr. Vineet Nayar took over as the CEO of HCL Tech in Oct'07. While we do not rule out a 'weak Q1FY14 performance' from Infosys, valuations at ~14.7x/13x FY14/15E P/E are reasonable (with weakening currency lending further support to earnings visibility) and given that we expect Infosys to revert to the 'PSPD' mode of execution ahead, we upgrade stock to BUY, TP Rs 2,900(V/s HOLD, TP Rs 2,500 earlier)," says Emkay Global Financial Services research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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