"Infinite Computer’s management is optimistic about the growth of the company due to some big deals wins expected in the near term and ramp up from existing accounts, thus have given a guidance of 20% top line growth and 11% PAT growth in US$ terms for FY13. In INR terms it expects top line to grow come at Rs 13.8 bn up 31% y-o-y and PAT to grow 21% y-o-y to Rs 1.46 bn. This high growth expectation is despite the decline in revenues from largest telecom client in FY12 and concerns over IT spending especially in Europe. We believe new deals wins, growth from existing clients and rupee depreciation will fuel the growth going forward."
"Management indicated only 21% increase in PAT for FY13E (top line expected to rise 31%) despite higher portion of revenues from non linear revenue models, significant rupee deprecation and no major hiring plans, which suggests that margins are going to be under pressure going forward. Main reason cited were reinvestment in business and increased SG&A expenses, which we believe is required in the tough environment to boost sales."
"We increase our top-line estimate on account of expected clients wins (yet to be announced), rupee depreciation and increase in business from existing clients. Our top line estimates for FY13E and FY14E now stand at Rs 13.7 bn and Rs 16.2 bn up 29.9% and 18.2% respectively. EBITDA margins for FY13E will contract by 81 bps to 16.5% due to reinvestment in business. We estimate EPS for FY13E and FY14E to stand at Rs 32.2 and Rs 39.5 respectively. The stock currently trades at a P/E of 3.2x and 2.6x FY13E and FY14E earnings which we think is at a steep discount to its peers considering its healthy deal pipeline, high cash reserve of Rs 56/share, healthy return ratios and pretty good cash flows generation. We maintain our "BUY" rating on the stock and maintain our target price of Rs 168 an upside of 63.3% from current levels," says BP Equities research report.
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