Investor's Eye: Update - Infosys (Maintain Buy with a revised price target of Rs4,115)

 

Investor's Eye [January 10, 2014]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Infosys Recommendation: Buy Price target: Rs4,115 Current market price: Rs3,549 Maintain Buy with a revised price target of Rs4,115 Result highlights The revenues of $2,100 million reported by Infosys for Q3FY2014 were a tad below our expectations. Nevertheless, the company's margin surprised us positively with a 140-basis-point sequential improvement to 25% (against our estimate of 23.7%). The margin growth was led by operational efficiency (the utilisation excluding trainees improved by 20 basis points quarter on quarter [QoQ] to 78% in Q3FY2014) and cost optimisation. The net income for the quarter was up by 9.5% QoQ to Rs2,875 crore (our estimate was Rs2,786.1 crore). Infosys continues to report impressive deal wins and signed five large deals of a total value of $500 million in Q3FY2014. The large deals signed in the last nine months add up to $1,950 million in value terms. The company raised its revenue growth guidance for FY2014 to 11.5-12.0% from 9-10% earlier (we have assumed a revenue growth of 12.4% in dollar terms for FY2014) and is now more confident about the improvement in the demand environment. We have tweaked our earnings estimates for the company to incorporate the higher margin assumptions of 24.9% and 24.6% for FY2015 and FY2016 respectively. Consequently, we have increased our earnings per share (EPS) estimates for FY2015 and FY2016 by 3.0% and 3.6% respectively. We maintain our Buy recommendation on Infosys with a revised price target of Rs4,115. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards, The Sharekhan Research Team

 

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