Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INFOSYS LTD.
Concerns on growth appear overdone
Infosys’ stock declined 8.4% post results as the market digested flat revenue guidance
(q/q in US$ terms) for the Mar-12 quarter. Clearly, weak macro is leading to
postponement of budget decisions and, hence, increases the uncertainty for the
sector. Management, thus, has to be prudent in its guidance. Furthermore, the March
quarter is also seasonally weaker – nine out of the past 10 years, the March quarter
q/q growth has been weaker than December with an average gap of 2%. Our positive
view on Infosys is based on its low earnings volatility, which makes it an excellent
investment in the today’s uncertain environment. Valuations are at the lower end of
the band and a slight change in US macro environment could significantly alter
perceptions on the stock. We maintain our 1-OW rating and price target of Rs3,320.
Dec-11 results were good. US$ revenue growth of +3.4% q/q (+4.4% in constant
currency) was in line with our estimates. Strong margin expansion lead to 3.6% beat on
EPS. Surprisingly, Europe was a key driver with 14 new deals and 16.8% q/q growth.
Mar-12 guidance disappoints. Mar-12 q/q guidance points to flat quarter as the FY12
US$ revenue guidance was revised down to y/y growth of 16.4% from 17-19% earlier. On
a rate of Rs52/US$, FY12 EPS guidance was revised up to Rs147.13.
Growth concerns appear overdone; retain 1-OW. We believe that visibility of the
business has reduced (as is evident in the lower guidance and a lack of budget
finalisations by clients); however, the underlying trends are not that weak. Lateral hiring
remains strong, and management talked about improving pricing. Contrary to earlier
episodes of low visibility, which were accompanied by US recessions, we believe that the
current period could be a more muddle-through economic environment in US.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INFOSYS LTD.
Concerns on growth appear overdone
Infosys’ stock declined 8.4% post results as the market digested flat revenue guidance
(q/q in US$ terms) for the Mar-12 quarter. Clearly, weak macro is leading to
postponement of budget decisions and, hence, increases the uncertainty for the
sector. Management, thus, has to be prudent in its guidance. Furthermore, the March
quarter is also seasonally weaker – nine out of the past 10 years, the March quarter
q/q growth has been weaker than December with an average gap of 2%. Our positive
view on Infosys is based on its low earnings volatility, which makes it an excellent
investment in the today’s uncertain environment. Valuations are at the lower end of
the band and a slight change in US macro environment could significantly alter
perceptions on the stock. We maintain our 1-OW rating and price target of Rs3,320.
Dec-11 results were good. US$ revenue growth of +3.4% q/q (+4.4% in constant
currency) was in line with our estimates. Strong margin expansion lead to 3.6% beat on
EPS. Surprisingly, Europe was a key driver with 14 new deals and 16.8% q/q growth.
Mar-12 guidance disappoints. Mar-12 q/q guidance points to flat quarter as the FY12
US$ revenue guidance was revised down to y/y growth of 16.4% from 17-19% earlier. On
a rate of Rs52/US$, FY12 EPS guidance was revised up to Rs147.13.
Growth concerns appear overdone; retain 1-OW. We believe that visibility of the
business has reduced (as is evident in the lower guidance and a lack of budget
finalisations by clients); however, the underlying trends are not that weak. Lateral hiring
remains strong, and management talked about improving pricing. Contrary to earlier
episodes of low visibility, which were accompanied by US recessions, we believe that the
current period could be a more muddle-through economic environment in US.
No comments:
Post a Comment