Infosys Technologies Ltd (Q4 FY08): “No reason to cheerâ€
CMP Rs1,510, SELL
Target price Rs1,341, Downside11.2%
ä Rupee revenue growth of 6.3% qoq in Q4 FY08 was in line with expectations. Volume growth was modest at 4.9% qoq while pricing improvement was negligible.
ä Slow growth was witnessed in the US region along with a material de-growth in banking and financial services segment.
ä EBITDA margin was stable qoq at 32.5% aided by SG&A leverage, better subsidiary profitability, rupee depreciation and absence of one-time expenditure.
ä Q4 FY08 net profit growth of 4.1% qoq, excluding the tax reversals, was marginally below expectations. Announcement of a special dividend of Rs20 and increase in payout policy is a positive surprise.
ä Terming the business environment as challenging and imposing revenue loss risk, management guides for a weak Q1 FY09. However, FY09 guidance of 19-21% revenue growth and EPS of Rs92.3-93.9 is healthy.
ä We believe that strong back-ended revenue growth expectation (Q2-Q4 FY09 CQGR 5.6-6.7%) and Re/$ assumption of Rs40 are key risks in the guidance.
ä Remain negative on Infosys with a price target of Rs1,341, implying 11% downside.
Click below for the quarterly update of Infosys Technologies Ltd.
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