Buy Infosys; target of Rs 2800: Motilal Oswal

Motilal Oswal is bullish on Infosys and has recommended buy rating on the stock with a target of Rs 2800 in its October 13, 2012 research report.

“Infosys' 2QFY13 results indicate some pick-up in momentum for the company, substantiated by: [1] performance around deal wins (6 large deals, 2 with a TCV of USD200m+, 2 in IMS, 8 transformational deals), [2] aggressiveseeming 3.7% CQGR guidance in USD revenues for 2H and [3] Continued orders' traction in Products & Platforms (TCV of USD500m), tying in with 14.5% QoQ growth in volumes ex-IT Services (which includes Platforms).”

“Infosys maintained its FY13 USD revenue growth guidance of at least 5% YoY. The guidance does not includes Lodestone acquisition. FY13 EPS guidance was revised down to INR160.6 (v/s INR166.46 earlier), at assumed currency rate of INR53/USD for rest of year (v/s INR55/USD assumed in 1QFY13). Operating margin is now expected to decline by 200bp YoY in FY13, led by wage hikes of 6% offshore (effective from Oct 1st) and 2-3% onsite (effective from January 1st). Our revenue estimates are largely unchanged post the results (-0.1% / -0.9% for FY13E/FY14E). Our EPS estimates for FY13E / FY14E are lower by 3.8% / 3.2%, factoring in moderation in our EBIT margin assumptions (down 161bp / 131bp).”

“We take comfort in increased revenue visibility on the back of deal wins, and would treat the correction in the stock post the results as an entry opportunity. Maintain Buy, with a Target Price of INR2,800, which discounts our FY14E EPS by 16x,” says Motilal Oswal research report.

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