The Perfect Computation - Infosys Technologies

We had recommended Infosys Technologies to our investors in our Issue 15 dated July 6, 2009 as a ‘Choice Scrip’ at Rs 1,796. Our recommendation was backed by factors such as signs of revival in the US economy and the resultant improvement in the Q1FY01 results and guidance for FY10.  Infosys has already announced its Q1FY10 figures and the results are not only better than street expectations but are higher than the company’s own guidance. While the topline of Rs 5,472 crore (up 12.70 per cent YoY) is in tune with expectations, the EPS of Rs 26.66 is as against the expected Rs 24-24.50.

The operating margins (34.10 per cent) have been better for the quarter as compared to 33.60 per cent in Q4FY09. Regarding the guidance, while Infosys has raised the earning guidance in dollar terms, in rupee terms it has reduced its revenue as well as earning guidance due to the appreciating rupee. In Q4FY09, the conversion rate for the rupee was pegged at Rs 50.72 per dollar and it is now pegged at Rs 47.91 per dollar.

For Q2FY10, the topline is estimated in the range of Rs 5,318 crore to Rs 5,413 crore. The EPS is estimated in the range of Rs 23.67 to Rs 24.09. For FY10 the topline is expected in the range of Rs 21,416 crore and Rs 21,747 crore. The EPS is estimated in the range of Rs 94.59 to Rs 96. Considering all these factors we advise investors to hold the counter with our earlier target price of Rs 2,100.