Buy Infosys; target Rs 2,792

Angel Broking is bullish on Infosys and has recommended buy rating on the stock with a target price of Rs 2,792 in its April 13, 2012 research report.

"For 4QFY2012, Infosys' results came in lower than our as well as street's expectations on revenue as well as operating front; however, the company's profit came in line with the expectations because of higher other income. The major disappointment came from the FY2013 USD revenue growth guidance which came in at 8-10%, much below Nasscom's estimated growth of 11-14% which is highly negative. In addition, the company gave tepid USD revenue guidance for 1QFY2013 of 0-1% qoq."

"For 4QFY2012, Infosys reported revenue of US$1,771mn, down 1.9% qoq, due to ramp down in certain projects in financial services industry especially in the North America geography. The company's EBITDA and EBIT declined by 108bp and 128bp to 32.6% and 29.9%, respectively, largely because of gaining from INR depreciation. PAT came in at Rs 2,316cr, aided by other income of Rs 652cr as against Rs 422cr in 3QFY2012."

"Management commentary has turned extremely cautious for the next year's budget flush pattern. Also, the company is witnessing delays in ramp-ups of the deals being signed. This is clearly reflected in management's disappointing FY2013 guidance of merely 8-10%. In addition, for 1QFY2013, management has given USD revenue growth guidance of 0-1% qoq which indicates that management is banking on back ended growth which makes us cautious as the second half of every fiscal year is typically slow. If Infosys meets its 1QFY2013 guidance, then to achieve its full year FY2013 guidance, the company requires above 4.2% qoq USD revenue growth each quarter from 2QFY2012. Hence, we have assumed moderation in demand going forward in FY2013 and have built in a USD revenue growth of 9.8% for FY2013. Over FY2012-14E, we expect USD and INR revenue CAGR of 11.4% and 12.2%, respectively. Over FY2012-14E, we expect a CAGR of 10.1% and 9.5% in EBIT and PAT, respectively. We value the company at 16x FY2014E of Rs 174.5 and recommend a Buy rating on the stock with a target price of Rs 2,792," says Angel Broking research report.