Accumulate Infosys; target of Rs 2710: Dolat Capital

Dolat Capital is bullish on Infosys and has recommended accumulate rating on the stock with a target of Rs 2710 in its October 12, 2012 research report.

“Infosys, Results slightly below expectation, mild rejig in guidance (cut by 0.3%) and question mark on Bala’s (CFO) role lead to another post result slide (down 5%) for Infosys. We believe there are certain concerns pertaining to sustained pricing levels and thus the profitability, but still feel sharp correction as an overreaction (refer Exhibit 1 & 2). We believe valuations are attractive but maintain our sector underperformer call on the stock and would see any major uptick only once it delivers at par performance.”

“Q2 revenues grew 2.6% QoQ driven by volume growth of 3.8% but was negated by pricing cut of 0.3% and sharp fall of 14% in product revenues (lumpy in nature). OPM were down 160bps QoQ owing to increased subcontracting cost and high support cost. It has cut ` EPS estimate by 4% adjusting for ` reset to 53 and wage hike offered 6% offshore (effective October) and 2% onsite (effective January). It reduced its constant currency revenue growth guidance by 0.3% to 5.7% which is not significant as it will also see uptick once it consolidates Lodestone’s numbers in Q3 numbers. We believe the company has fair chance of exceeding its revenue guidance for FY13.”

“We have cut our FY13/14 ` EPS estimates by 2% (owing to Fx reset and wage hike impact) but largely maintain our Revenue estimates intact. Maintain Accumulate and sector underperformer rating on the stock,” says Dolat Capital research report. 

FIIs holding more than 30% in Indian cos

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