20 October, 2008

Infosys Technologies

Current market price: Rs 1,202.6

Target Price: Rs 1,426

Upside: 18.58%

Brokerage: Religare Hichens, Harrison & Co

Infosys Technologies just about managed to meet the lower end of its Q2 FY09 dollar revenue guidance. Rupee revenue and net profit for the quarter grew by 11.5 per cent and 10.8 per cent quarter-on-quarter (q-o-q), respectively.

The management has reduced its dollar guidance for FY09 by 4.8 per cent, for both revenue and EPS, to factor in the dollar appreciation against global currencies and weakening macro-economic conditions in the US.

The dollar-denominated revenue guidance by the management for Q3 FY09 points towards negative to flat growth. Blended billing rates declined marginally by 0.4 per cent q-o-q. The management has indicated that it expects pricing to remain stable.

Infosys has made it clear that it will not engage in a bid war with HCL Technologies for the acquisition of Axon Group, citing possible expensive valuations.

 Taking into consideration challenges in the demand environment, the brokerage has reduced Infosys’ revenue estimates for FY09 and FY10 by 3.6 per cent and 2.9 per cent respectively, while the EPS estimates for these two years stand revised downwards by 3.9 per cent and 3.8 per cent, respectively.

At Rs 1,225, the stock trades at 12.4x FY09E and 11.2x FY10E earnings, respectively. Maintain Accumulate.