Blue Chip Stock Analysis - Infosys

Here is stock analysis and report on Infosys published by Angel stock broking. Stock broker has recommended to buy stocks of Infosys for one year time period with target stock price.
Results Update
In 3QFY2012, Infosys’ financial results were lower than stock broker's and market analyst's expectations on USD revenue front. But since rupee has been depreciating against USD for some time now, company's margin and bottom-line are improved.

Also, Infosys has lowered FY2012 USD guidance below stock analysts's expected estimates to 16.4% from earlier 17-19% yoy. The company has provided tepid revenue guidance for 4QFY2012 which is almost flat in terms of growth.

Quarterly highlights
For 3QFY2012, Infosys reported revenue of US$1,806mn, up 3.4% qoq, aided by 3.1% qoq volume growth and 0.8% qoq blended pricing growth. In INR terms, revenue came in at Rs9,298cr, up by whopping 14.8% qoq. The company’s EBITDA and EBIT margin increased by 265bp and 302bp qoq to 33.7% and 31.2%, respectively, largely gaining from INR depreciation. PAT came in at `2,372cr, up 24.5% qoq.

Growth Outlook
Infosys management has provided cautious outlook for next year’s budgets. Management expects growth to be flat or marginally negative. Company is witnessing delays in ramp-ups of the deals being signed. This is reflected in the muted 4QFY2012 and FY2012 guidance provided by management. This clearly indicates challenging visibility in business volumes and management’s future expectations.

The company would record USD revenue growth of 16.4% and 13.1% yoy in FY2012 and FY2013, respectively. Considering revised INR assumption would go downwards for 4QFY2012 and FY2013 to `51.0 and `50.0, respectively, following a steep 15% depreciation against USD over the last four months. This has led to INR revenue growth for Infosys to be higher than USD revenue growth at 24.1% and 16.5% yoy for FY2012 and FY2013, respectively.

Stock Valuations
Over FY2011–13E, we expect a CAGR of 19.2% and 19.0% in EBITDA and PAT, respectively. Valuing the company at 18x FY2013E of Rs.169. It is recommended to Buy Stocks of Infosys with a target price of Rs.3,047.

Detailed stock report from Angel stock broking can be downloaded here.