Friday, April 15, 2011

Infy nos no more yardstick for sector, TCS may outperform

Infosys Technologies once used to be a benchmark for the I-T sector, but not any more, say analysts

The technology bellwethers fourth quarter earnings and rupee revenue guidance for 2011-12 (April-March) came in well below street expectations, but analysts say the poor performance is not likely to be a trend across the sector now.

"Infosys is no more a benchmark for the I-T sector. This (Infosys earnings) doesn’t signify that the sector as a whole is likely to underperform," ICICI Securities analyst Abhishek Shindadkar told

Hardik Shah of KR Choksey Shares agreed. He said TCS might outperform Infosys, and even Cognizant Technology Solutions is likely to report better earnings.

Shah told the disappointing results could be a blip for Infosys and not necessarily a trend for the industry.

"Infosys results, guidance will kind of come and go but it will not have as damaging effect on the IT sector and on the markets as a whole as it use to have earlier," Dipan Mehta, member BSE, NSE told CNBC-TV18.

Infosys reported a net profit of Rs 1,818 crore up 17.1% year-on-year, while revenue was up 22% on year to Rs 7,250 crore in the fourth quarter. Analysts had expected the company’s net profit at Rs 1,856 crore on revenue of Rs 7,447 crore for the fourth quarter, according to a CNBC-TV18 poll.

Infosys has guided for an earnings per share of Rs 126.05-128.21 for 2011-12, while many analysts had projected an EPS of close to Rs 145-150.

Infosys has had a tradition of giving a conservative guidance. Since 2002, except in 2008, every year the company’s revenue and earnings per share growth has been higher than it had forecast.

But now analysts say they are likely to lower their 2011-12 (April-March) earnings expectations for Infosys Technologies since the guidance is way below what they were expecting.

"A downgrade is most likely to happen. An EPS of Rs 150 is out of the way now. We will be surprised if Infosys even manages Rs 140 a share," said Shindadkar of ICICI Securities.

The brokerage had forecast an EPS of Rs 135-137 a share, which in itself was conservative to the street consensus of Rs 150 a share. Shindadkar said the brokerage would now have to downgrade their forecast closer to what the company is expecting.

KR Chosey’s Shah also said their might be some downgrade in estimates for Infosys Technologies. But a decision is only likely to be taken post further analysis and conference call with the company.

ICICI Securities and KR Choksey have a “hold” rating on the stock. ICICI Securities has a target price of Rs 3,350 on Infosys share.

At 13:40 hrs, Infosys shares were down 8.7% to Rs 3,018.45 on National Stock Exchange.


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