Hold Infosys; target of Rs 2884: KRChoksey
KRChoksey has recommended hold rating on Infosys with a price target of Rs 2,884 by assigning multiple of 16 times (10 percent discount to TCS target P/E multiple) to its FY15E EPS of Rs.180.3, in its research report.
July 19, 2013 / 19:19 IST
KRChoksey's research report on Infosys
The company beats consensus and our revenue estimates (2.7 percent QoQ growth in USD terms V/s our 2 percent and consensus 1.1 percent QoQ growth expectation) primarily led by momentum in ERP segment. However, we believe it will be prudent to be conservative about pick up in discretionary spend especially considering disappointing Accenture (consulting revenue flat YoY) and Oracle results (new software license grew by 1 percent YoY).The management has maintained its revenue growth guidance of 6 percent to 10 percent YoY in USD terms in FY14E; which implies -1 percent to 1.4 percent CQGR during Q2 FY14E to Q4 FY14E. It indicates the management expects volatility in revenue growth will continue in coming quarters; which inturn lends weight to our belief that spending by clients on discretionary areas continues to be modest.Margin unlikely to show any significant improvement on account of INR depreciation against USD, as wage hike will adversely impact margins by ~300
bps QoQ in Q2 FY14E.Stock run-up on result day leaves limited upside; as valuation gap with TCS has narrowed down to ~10 percent without any material change in fundamentals.Valuation and view: We believe positive surprise at revenue front is nullified by disappointing commentary about margins in coming quarters; hence we believe there is limited scope for increase in consensus earnings estimates (excluding impact of changes in exchange rate assumption). Moreover stock run-up on result day leaves limited scope for rerating; as valuation gap with TCS has narrowed down to ~10 percent. Hence, we recommend “HOLD” on the stock with a price target of Rs 2,884 by assigning multiple of 16 times (10 percent discount to TCS target P/E multiple) to its FY15E EPS of Rs.180.3," says KRChoksey research report. 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. 
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