RAMAKANTH
20-11-2007, 08:44 AM
ICIC Securities has come out with research report on Infosys Technologies and has maintained buy rating on stock, in report dated on November 16, 2007.
"At current FY09E P/E of 16.7x (at assumed rupee/US dollar rate of Rs39 for FY09E), the downside to the stock is limited. Though rupee appreciation is the biggest concern, Infosys will trade at FY09E P/E of 18.1x with Rs91.4 EPS even in the worst case (FY09E rupee/US dollar at Rs37, which is 7.3% rupee appreciation from FY08E rate of Rs39.9). This is after assuming no further improvement in cost efficiency. Infosys contained its margin decline to just 86bps YoY in Q2FY08 despite 13.2% rupee appreciation, which should have affected margins approx 450bps. Therefore, assuming a conservative one-year forward P/E of 20-21x to our worst-case rupee/US dollar assumption, Infosys will yield at least 11-16% returns from the current levels. Also, years such as FY08 – with average 11% rupee appreciation, thereby capping the guided rupee recurring EPS growth to 18% versus guided dollar EPS growth of 33.1% may not recur as the pace of rupee appreciation may be lower in coming years in our view. Reiterate BUY. According to ICICI Sec.
"At current FY09E P/E of 16.7x (at assumed rupee/US dollar rate of Rs39 for FY09E), the downside to the stock is limited. Though rupee appreciation is the biggest concern, Infosys will trade at FY09E P/E of 18.1x with Rs91.4 EPS even in the worst case (FY09E rupee/US dollar at Rs37, which is 7.3% rupee appreciation from FY08E rate of Rs39.9). This is after assuming no further improvement in cost efficiency. Infosys contained its margin decline to just 86bps YoY in Q2FY08 despite 13.2% rupee appreciation, which should have affected margins approx 450bps. Therefore, assuming a conservative one-year forward P/E of 20-21x to our worst-case rupee/US dollar assumption, Infosys will yield at least 11-16% returns from the current levels. Also, years such as FY08 – with average 11% rupee appreciation, thereby capping the guided rupee recurring EPS growth to 18% versus guided dollar EPS growth of 33.1% may not recur as the pace of rupee appreciation may be lower in coming years in our view. Reiterate BUY. According to ICICI Sec.