15 October, 2008

Infosys

Cmp: Rs 1,397.05

Target price: Rs 1,825

JP Morgan Research has assigned an ‘overweight’ rating to the stock saying Infosys has reported good 2QFY09 results ahead of consensus. “We have a positive view on the sector, given our belief in secular offshoring trend but do accept that weak guidance would put pressure on Infosys and the sector near-term,” said the research firm in a note to its clients.

According to the research firm, the weak guidance will raise fears about FY10E (estimated) rather than the next couple of quarters as the Indian IT sector might face a lot more pressure in 2009/FY10 from customers. “While consensus numbers might not change for FY09 (due to continued rupee/US$ depreciation), FY10 estimates might be cut.

We believe that any panic sell-off on back of this guidance remains a good entry point,” the note said. FY09 guidance was revised downwards significantly “more than our consensus and expectations,” said the JP Morgan note. “Management cuts its $ revenue/EPS guidance by 5%/5% for FY09 and is now expecting 13-15%/10% revenue/EPS growth in FY09,” the note added.