India: Infosys reported strong set of quarterly numbers, led by robust volume growth and uptick in onsite pricing. Management raised its FY11 USD revenue growth guidance to 24-25 per cent YoY (from 19-21 per centYoY previously) validating the confidence in the demand environment, which would underpin growth going forward, according to the company.
Increase in USD revenue guidance includes outperformance of this quarter but implied Q4FY11 revenue growth guidance appears muted at 1.4 per cent QoQ. Management has raised its hiring target to 40,000 employees, which reflects the confidence in the demand environment. Infosys is expected tooutperform its EBIT margin guidance of 130bpsYoY for FY11. “We raise our EPS estimates by 0.5 per cent and 2.9 per cent for FY11 and FY12. We maintain our Buy recommendation with a target price of Rs 3,500 based on 23x FY12E,” according to the management.
The company’s revenues grew 12.1 per cent QoQ to INR 69,470mn whereas USD revenue rose 10.2 per cent QoQ to USD1, 496mn. EBIT margin improved 190bpsQoQ to 30.2 per cent led by cross currency movement and higher utilisation.
The company won nine large outsourcing deals in H1, of which a few are more than USD100mn. It has a strong deal pipeline of large transformational deals. Its top 10 clients grew 12.7 per cent QoQ.
PINC Research is bullish on the company and has recommended buy rating on the stock with a target of Rs 3500 in its October 15, 2010 research report.
Source: PINC Research
