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Lehman Brothers Upgrades Indian IT

January 8, 2008

Breaking News: You are reading this first hereIn a research report released just minutes ago, Lehman Brothers has upgraded the Indian IT stocks. The upgrade comes 3 months after their bold move to call a SELL on Indian IT.

Infosys Technologies:
Infosys’s recent multiple contraction has priced in negatives like an appreciating rupee, a rising tax rate and a slowdown in EPS CAGR to 18.4% in next five years. The stock price will be driven by revenue and earnings momentum, which is likely to continue in the next few quarters. Infosys is expected to report an EPS of Rs 80.6 for FY08 and Rs 96 for FY09. Lehman has set a target price of Rs 2150 basedo n DCF.

Satyam Computers:
The recent multiple contraction for Satyam already prices in negative news such as appreciating currency, rising tax rates and a slowdown in EPS CAGR to 15.4% in the next five years. Continued offshoring demand in ERP services, we see good prospects for Satyam in the next couple of quarters. Lehman expects Styam to report an EPs of Rs 26.1 for FY08 and Rs 30.3 for FY09. Lehman is OVERWEIGHT on Satyam with a 12 month price target of Rs 549.

Wipro:
The contraction in multiple in the past one year reflects negatives such as rupee appreciation, rising tax rates and a slowdown in EPS CAGR to 18% for the next five years. Wipro has made some good acquisitions (especially of Infocrossing) in the recent past, and we expect that the company will post solid growth in FY09. Expect the domestic IT services business to do well based on the growing automation needs of the Indian corporate sector. Wipro is expected to report an EPs of Rs 23.6 and Rs 29.2 for FY2008 and FY2009 respectively. Lehman is OVERWEIGHT on Wipro with a price target of Rs 619.

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