Accumulate Infosys; target of Rs 2573: Angel Broking

Angel Broking is bullish on Infosys and has recommended accumulate rating on the stock with a target of Rs 2573 in its October 12, 2012 research report.

“Infosys reported its 2QFY2013 results which were decent on the revenue front but disappointed on the operating front. The most disappointing thing in Infosys’ result was the decline in operating margin by ~150bp qoq. In addition, the company announced that its CFO V. Balakrishnan would give up his position from October 31, 2012 and will be replaced by VP-finance Rajiv Bansal. Balakrishnan will, however, continue to be on the company's board and will now look after BPO operations, Finacle and India operations. Infosys has seen a slew of management changes in the last couple of years which is a cause of concern. We maintain our Accumulate rating on the stock.”

“For 2QFY2013, Infosys reported a revenue of US$1,797mn, up 2.6% qoq, led by a modest volume growth of 3.8% qoq. The EBITDA margin declined by 151bp qoq to 29.1%, because of higher subcontracting costs, warranty costs and one-time payout for promotion-based compensation increases. The PAT came in at Rs2,369cr, up 3.5% qoq, aided by higher other income of Rs706cr as against Rs476cr in 1QFY2013.”

“The management commentary indicates that the environment remains exactly where it was a few months back. The company continues to see challenges and delays in ramp-ups of the deals being signed. Post 1HFY2013 performance, the company requires a minimum 3.5% qoq growth rate in the next two quarters to achieve its FY2013 USD revenue growth guidance, which in the current scenario looks a bit stretched. Hence, we believe the company can achieve 5-5.5% yoy revenue growth in FY2013, including revenue from Lodestone. Over FY2012-14E, we expect a USD and INR revenue CAGR of 7.0% and 11.0%, respectively. Over FY2012–14E, we expect a CAGR of 8.4% and 8.6% in EBIT and PAT, respectively. At the current market price of Rs2,396, the stock is trading at 15.0x FY2013E and 14.0x FY2014E EPS. We value the company at 15x FY2014E EPS of Rs172 and maintain our Accumulate rating on the stock with a target price of Rs2,573,” says Angel Broking research report.

Public holding more than 90% in Indian cos

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.

To read the full report click on the attachment

Read More