Maintain Buy on Infosys Technologies - Motilal Oswal

Infosys Technologies (INFO IN; Mkt Cap USD38.5b, CMP Rs2,989, Buy)

4QFY11 revenue well below expectations (US$1,602m v/s est. of US$1,653m), driven by volume decline of 1.4% v/s est. of 4% increase.

Volume decline of 1.4% represented a rare but material miss relative to Infosys' guidance which had called for volume growth of 1-2% in 4QFY11.

Though US$ revenue guidance for FY12 of between 18-20% and INR revenue guide of 15.4-17.3% is in-line with our expectations, EPS estimates fall well short.

Full year margin decline to be driven primarily by currency (~100bp) and utilization staying near current low levels (impact of ~125bp).

US$ revenue growth guidance for 1QFY12 of just 3% (traditionally strong quarter) at mid point. Implied CQGR for next three quarters would be 5.5%

We are revising our topline estimate slightly higher to 24% driven primarily on account of expectation of higher blended realization increase of 2.6% v/s our prior estimate of 1.5%. This results in an EPS downgrade of 7.6% from Rs152 to Rs140.6 (implying YoY growth of 17.7%). Assuming similar margin profile for FY13, we have downgraded our FY13 EPS estimate by 7.3% Keeping FY13 target P/E at 20x, our revised price target is Rs3,400, implying an upside of 14%. Maintain Buy.

Source : Equity Bulls

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