Maintain Buy on Infotech Enterprises - Kotak

Infotech Enterprises's results were broadly in line with estimates on the EBIDTA front. Volumes grew by 3.9% as compared to 2% in 1Q. Some of the client-specific issues, which had impacted the company, have started getting addressed towards the end of the quarter. EBIDTA margins were maintained QoQ as the leverage on salary hikes was set off by higher contribution from onsite projects in US and some one-time costs.

The business outlook is largely positive subject to few sub-sectors like telecom and railways which are facing challenges on some fronts. The management has maintained its guidance of achieving FY13 revenue growth at the lower end of the 11-14% band set by Nasscom. We tweak our earnings estimates for FY13 and introduce FY14 estimates. FY14E earnings stand at Rs.22.5 per share.

Management continues to see opportunities in the higher thrust which aerospace companies (Bombardier, etc are major clients) are giving to efficient and light engine design skill sets- areas where IEL has domain expertise and existing impressive client roster. However, margins have scope for improvement. These reflect the challenges of a mid-tier company.

We increase our PT to Rs.221 (v/s Rs.205), based on FY14 estimates. Maintain BUY. Expected cash of Rs.58 per share by FY14 end, may provide cushion to the stock.

Source : Equity Bulls

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