Buy Infosys - Prabhudas Lilladher

Volume growth – It does matter: Infosys reported volume growth at 3.8% QoQ (Onsite: 4.4%, Offshore: 3.6%), which was better than our/consensus expectation. We see acceleration in volume growth; a positive for the overall business. Deal ramp-up, client budgets and bottoming out rampdown give management the confidence for stronger H2FY13.

Flexibility in deal structuring – To improve momentum: Infosys has been flexible in pricing to structure the deal. Moreover, recent deals indicate the company being forthcoming to acquire clients' asset and employees to consummate the deal. The macro-environment supports more of these deals. Over the last 6 months, Infosys has signed few large deals and rampup of which would help to accelerate the volume growth.

Strong client addition – Not captured in performance: Infosys added highest number of clients among the peers over the last four quarters. However, the quarterly performance didn't add-up to the same. We expect ramp-up of projects from the client win to result in a positive surprise. We expect the ramp-up to start driving the growth for the company.

Trough valuation to restrict further de-rating: Infosys is currently trading at 13.1x FY14E earnings estimate, a trough valuation at which it traded post Lehman crisis. Retain 'BUY' due to valuation comfort, with a target price of Rs2,900.

Source : Equity Bulls

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