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Infosys Disappointing Results – ReOrganisation + Delays A Drag

July 13, 2011

Infosys Technologies, once upon a time the bellwether of the Global Outsourcing Industry, in our view has failed to move past the point of inflection and is Done company [Company which can’t grow QoQ, is Done and Matured enough with Fat & Contended Management] for Investors looking for a Stock that can beat the benchmark. [Evident from the Sell-Off]

1QFY12 turned out to be a weak quarter as Infosys dealt with multiple issues on reorganization, high attrition levels and operational slippages. Infosys registered revenue growth of 4.3% QoQ and EBITDA margin fell 300bps QoQ . Offshore/onsite pricing was down qoq – against street expectations of an uptick.

Infosys’ woes continued as the company lost out on multimillion dollar engagements due to staffing challenges and delay in rollout of new organization structure, which may have led to dilution of external market focus.

Management Views & Guidance:
The management did not raise their FY12 revenue guidance from 18-20% growth. Their commentary centred on continuing macro
concerns, but there was no indication of any impact of this on demand. Management suggested that discretionary spend was flattish (positive earlier), pricing was stable (against expectations of some uptick), Infy will need higher investments in Europe to make it grow (investors were hoping Europe recovers) and telecom continues to struggle.

Infosys FY 2012 EPS Estimates and 12 Month Stock Target Prices
Here are the Various Views of FII and DII on Infosys
Credit Suisse – Rs 138 & Target of Rs 3100
Citi – 140 and Target of Rs 3200
BNP Paribas – 141 and Target of Rs 3300
Stanchart – 138 and and Target of Rs 3150
BOFA Merrill – 137 and Target of Rs 3400
Goldman Sachs – 140 and Target of Rs 3300
UBS – 138 and Target of Rs 3550 [The Bullish Tone, Why ?]
Kotak – 140 and Target of Rs 3400
IIFL – 134 and Target of Rs 3011
Motilal Oswal – 137 and Target of Rs 3100
ENAM – 136 and Target of Rs 3075

We prefer TCS as the stock pick for Indian IT Sector.

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