Prabhudas Lilladher is bullish on Infosys and has recommended buy rating on the stock with a target of Rs 3920 in its April 15, 2014 research report.
"Infosys performance in Q4FY14 was mixed‐bag with revenue softer, but margins ahead of expectation. The management has been successful in delivering on "Cost" front, and making investments on "Sales" and "Delivery" front. We expect benefits from later two to start getting reflected in H2CY14. We retain "BUY". Revenue declined by 0.4% (‐0.4% @cc) QoQ was just short of expectation (Cons.: 0.3%, PLe: 0.5%). The beat to the EBITDA margin expectation with expansion of 46bps QoQ (strongest Q4 expansion since Q4FY05) yielding EPS growth of 4.1% QoQ (strongest Q4 growth since Q4FY07). We expect cost efficiency to drive earning upside in FY15."
"Infosys continues to drive delivery towards offshore, which will have impact on revenue. Our analysis indicates ~65¢ impact on revenue for every USD1 offshored and a positive impact of ~35bps on margin for every percentage point move towards offshore. Hence, in last 4 quarters, revenue lost is ~USD 36m due to offshore drive in FY14. We expect impact on revenue to precede, followed by increased volume growth (with a lag), as cost optimization make deal‐bids more competitive. We expect Infosys near‐term challenges to build revenue momentum for FY15 due to weaker exit rate in FY14. However, we expect margin tailwind to provide earning momentum. We see no downside risks to our estimates. We revise our TP to Rs3,920 (from: Rs 4,150), 17x (from 18x) FY16e earnings estimate," says Prabhudas Lilladher research report.
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