Buy Infosys; target of Rs 2686: Firstcall Research

Firstcall Research is bullish on Infosys and has recommended buy rating on the stock with a target of Rs 2686 in its October 19, 2012 research report.

“Infosys, formerly known as Infosys Technologies Limited is a global technology Services Company headquartered in Bangalore, India. The company has changed its name to Infosys Ltd. on June 16, 2011. It is the second largest IT exporter in India. Infosys Limited was started in 1981 by seven people with US$ 250. Today, it is a global leader in the "next generation" of IT and consulting with revenues of US$ 6.994 billion (FY12). Infosys takes pride in building strategic long-term client relationships. 97.8% of revenues come from existing customers (FY12). Infosys defines designs and delivers technology-enabled business solutions for Global 2000 companies. Infosys provides a complete range of services by leveraging its domain and business expertise and strategic alliances with leading technology providers. Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing.”

“Infosys Ltd. is a global leader company in the "next generation" of IT and Consulting Services & is recognized for its world-class management practices and work ethics, reported its consolidated financial results for the quarter ended 30th September, 2012. The company’s net profit jumps to Rs.23690.00 million against Rs.19060.00 million in the corresponding quarter ending of previous year, an increase of 24.29%. Revenue for the quarter rose 21.72% to Rs.98580.00 million from Rs.80990.00 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.41.42 a share during the quarter, registering 24.29% increase over previous year period. EBITDA is Rs.105640.00 millions as against Rs.84860.00 millions in the corresponding period of the previous year.”

“Infosys has received the Microsoft Platform Modernization award for sales achievement for its Legacy Modernization solution, which helps customers migrate to Microsoft platforms. The award reinforces the longstanding alliance between Infosys and Microsoft in developing best-in-class solutions. Many companies look to migrate their applications to more flexible and scalable Microsoft solutions such as Microsoft Windows Server and Microsoft SQL Server because of the high cost and inflexibility of legacy mainframe systems. The Infosys Legacy Modernization solution helps ease the transition and provides various modernization techniques that lower total cost of ownership (TCO) and help fuel business growth.”

“At the current market price of Rs.2388.00, the stock P/E ratio is at 13.87 x FY13E and 12.18 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.162.22 and Rs.184.79 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 16% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 9.61 x for FY13E and 8.40 x for FY14E. Price to Book Value of the stock is expected to be at 3.17 x and 2.51 x respectively for FY13E and FY14E. The second quarter witnesses a healthy increase in overall sales as well as profitability on account of powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend buy in this particular scrip with a target price of Rs.2686 for Medium to long term investment,” says Firstcall Research report.

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