Should you still hold on to your Infy stock?

2008-01-11 11:47:14 Source : CNBC-TV18

Infosys Technologies has announced its third quarter numbers. It has posted consolidated net profit of Rs 1231 crore for the quarter ended December 2007 as against Rs 1100 crore  in previous quarter.

Infosys Technologies has announced its third quarter numbers. It has posted consolidated net profit of Rs 1231 crore for the quarter ended December 2007 as against Rs 1100 crore in previous quarter. The company has issued its guidance for FY08.  In dollar terms, it sees its FY08 revenues at USD 4.17 billion versus USD 4.18 billion. The FY08 guidance assumes tax reversal of Rs 101 crore.

 

What do these numbers mean? Should you still hold on to your Infosys stock? CNBC-TV18 found what market experts had to say -

Reacting to Infosys results, market analysts like Nilesh Shah of Envision Capital said, “Broadly, the numbers are in line with expectations. The heartening fact is that the company has been able to meet its guidance and numbers are probably a tad better than their guidance."

But it that something material enough to swing markets in another direction and charter a new course for the markets?

He said, "My sense is that the numbers aren’t good enough to do that and in the short-term what is very important is the market sentiment and there are definitely other factors driving the sentiment for the market in addition to the quarterly numbers of Infosys.” 

Speaking to CNBC-TV18, Moshe Katri, MD, Cowen & Company

 also thinks Infosys numbers are inline with expectations and there are not too many surprises. The valuations and sentiments of the company are at historic lows, he said. He likes the Infy ADR on 6-12 month basis, but the rally will be short-lived, he said.

 “The numbers are actually pretty much inline. If one normalizes the tax rate, the matrix, if one looks at pricing, the hiring numbers, the growth in BFSI, the new client addition, I don’t think there are too many surprises here and remember that we got into this quarter with extremely low and negative sentiment and low expectations for Infosys and probably the group in general. I think the stock will continue to be volatile and the big issue right now is directionally what happens to the Budget 2008 and at this point certain data will impact the performance probably during the next few months,” he said.

But Dipan Mehta, Member BSE and NSE

thinks Infosys numbers are lower than the market estimates. According to him, the stock will remain at the levels that it is at. Dipan said the best way to play the IT sector is to stick with the midcaps as they would offer out performance as compared to the largecap IT stocks.

Mehta said, “One the face of it, the numbers look quite exciting. But when one considers the Rs 50 crore tax right back, the numbers are more or less in line with market expectations. In any case, there wasn’t much of enthusiasms or expectation from Infosys numbers. I think the stock will remain at the levels at which it is. This may just be an event which will come and go and not impact positive view on this particular stock too much or its price movement going forward. The YoY growth rates are now between 16-18%. If we consider that for FY10, the tax implications will also start trickling in, then these growth rates YoY would further deteriorate.”

Apurva Shah, VP & HOR, Prabhudas Lilladher told CNBC-TV18 that in terms of revenue, the Infosys results were below expectations though the margin performance was quite surprising. He added that they have gained everything they had lost in margins in quarter one.

"In phase of all the troubles that they are facing, because of the currency, I think a performance like this on the margin front is really impressive. They have gained everything they had lost in margins in quarter one. They had lost about 300 basis points in quarter one; in fact more has been recovered in quarter two and quarter three." he said.

SA Narayan

, MD, Kotak Securities said that Infosys’ Q3 results are in line with expectations. He sees Infosys' Q4 growth at 20%. He said, “I think Infosys results were in-line with what the markets expected. To that extent it was good and the good part is that there were no negative surprises on that. And I think the next quarter will be reasonably on the same lines and the market is expecting that the company will grow about 20%, which is an EPS of about Rs 95-96 for the future which means that Infosys is trading at about 16 times to FY09. This is on a broad basis reasonable on current valuations. What the market is still concerned about is that how much will the downturn in the US markets and the European markets will substantially affect the topline. So we need to wait and watch for guidance for the next year. So to that extent, on a broad basis, no negative surprise is a good news; but the markets would still like to wait and watch before deciding whether they can take a positive view on the stock.”

 

"The Infosys numbers very clearly signal that continued business strengths and comparative advantages have not deserted the company and in a very difficult rupee environment we have seen the company post a topline growth and a fairly reasonable bottomline growth as well. It very clearly indicates that you ought to continue being invested in the sector and perhaps even buy on declines. IT would easily be the sector to expect multiple gains from over the next couple of years, despite the difficult currency environment," Rajesh Jain, Pranav Securities said.

 

 

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