Dear All,
Forwarding you the Result Update on Infosys for 1QFY2012 with an Accumulate recommendation and a Target Price of `3200 (12 months)
For 1QFY2012, Infosys reported results that were almost in-line with our as well as street expectations. The company’s performance was modest with 4.0% qoq volume growth. The disappointment came from lower-than-expected 2QFY2012 guidance of 3.5–5.0% qoq growth in USD revenue, which is seasonally the strongest quarter. Also, revenue growth guidance for FY2012 was left unchanged at 18–20% yoy growth. We expect revenue growth (in USD terms) to record a 21% CAGR over FY2011–13E. We recommend Accumulate on the stock.
Modest results: For 1QFY2012, Infosys reported revenue of US$1,671mn, up 4.3% qoq. In INR terms, revenue came in at `7,485cr, registering 3.2% qoq growth due to INR appreciation of 1.0% qoq against USD. The company’s EBITDA and EBIT margins declined by 298bp and 291bp qoq to 29.1% and 26.1%, respectively, due to wage hikes given in 1QFY2012, effective from April 1, 2011.
Outlook and valuation: Management has indicated 2QFY2012 revenue growth to be 3.5–5.0% qoq only and has kept the annual revenue guidance unchanged at 18–20% yoy. This implies an ask rate of 5.5% CQGR in revenue over 2HFY2012 to meet the upper end of the guidance. Also, in the midst of looming macro concerns and subdued ramp-ups in discretionary spending, the outperformance of 3–5% on management’s upper end of the guidance looks limited as it implies an ask rate of 6.5–7.5% CQGR in revenue over 2HFY2012. Being cognizant of the deteriorating macros, client-specific issues (BT account still being anaemic) and muted earnings guidance for FY2012, we have cut our EPS estimates for FY2012 and FY2013 to `137 and `160, respectively. Thus, we revise our one-year forward target PEx downwards to 20x from 21x and value the stock at a target price of `3,200 (earlier `3,424) and recommend Accumulate on the stock.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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