Buy Infosys - TP Rs.2800 - Emkay

Buy, Target Price Rs 2,800 Trust the long term track record

Relatively muted expectations given the recent disappointments/misses: Relatively muted expectations post the recent disappointments/misses on qtrly performance. See that reversing over the medium term with organizational rejig behind and mgmt focused in maintaining it's share in the bread and butter business.

More acceptance than denial of the past misses: Infosys management now seems to acknowledge it's recent relative underperformance to peers and intends to cut that as it intends to protect it's market share in the break and butter business along with Infosys 3.0 strategy of moving up the value chain.

Inexpensive valuations make us keep the faith: Infosys currently trades at ~14.3x/13.3x FY13/14E P/E and 4%+ FCF yield which in our view capture most of the recent disappointments and do not price in any possible upside surprises. We see an inline/better Q1FY13 performance assuaging street nerves after recent disappointments.

Near term catalyst and earnings performance: Valuations at ~14.3x/13.3x FY13/14E P/E and 4%+ FCF yield make us keep the faith despite recent misses and Infosys having lost it's bellwether status to TCS. A 20% relative discount more than captures the relative underperformance in our view. We believe an inline/better Q1FY12 show will drive confidence to the street ahead.

Source : Equity Bulls

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