Buy Infosys; target of Rs 2940: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Infosys and has recommended buy rating on the stock with a target of Rs 2940 in its April 13, 2012 research report.

“Infosys’ Q4FY12 performance was well below our/consensus expectation. Moreover, a disappointing Q4FY12 performance was accompanied by even weaker guidance for FY13/Q1FY13. Nevertheless, the operating metrics of the company does not indicate significant weakness ahead. The client specific issues are likely to get shorted out as we progress in FY13. We revise expectation down and cut our TP to Rs 2940.” ‘

“Infosys’ revenue guidance for 0-1% for Q1FY13 and 8-10% (PLe:10-13%, Cons:12-14%) for FY13 was dampener for the sentiments. The divergence in performance between Infosys’ performance and global tech majors (Accenture, Capgemini, Oracle) was a big negative surprise. Operating in the same demand environment, we failed to anticipate the strong dichotomy in the performance. Three reasons why we went wrong 1) Impact of clients ramp-downs (in BFSI) was stronger than anticipated 2) Stickiness to quality over quantity have stronger implication on growth 3) Shelved/Deferred projects made the condition even worse Infosys added 52 new clients (29 new client additions) in the quarter, with 8/4 US500/G1000 clients. Client addition is strongest among tier-1 Indian peers across the buckets.”

“We tweaked our model with lower volume growth. We revise our USD revenue by 3.9% and 3.9% downward with higher margin by 34bps and 52bps for FY13 and FY14, respectively. We expect FY13 momentum to be in-line with guidance. We retain ‘BUY’ rating, with TP of Rs 2940, 18x FY13e earnings estimates,” says Prabhudas Lilladher research report.   

Institutional holding more than 40% in Indian cos

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