Maintain Buy on Infosys Technologies Ltd. - PINC Result Update

Infosys reported another strong set of quarterly numbers, led by robust volume growth and uptick in onsite pricing. Management raised its FY11 USD revenue growth guidance to 24-25%YoY (from 19 21%YoY previously) validating the confidence in the demand environment, which would underpin growth going forward.

* Volume-led growth, pricing surprises positively
* Broad-based growth across verticals and geographies
* Uptick in discretionary spend – demand for high-end services
* Large deal pipeline and strong client mining

Outlook – Increase in USD revenue guidance includes outperformance of this quarter but implied Q4FY11 revenue growth guidance appears muted at 1.4%QoQ. Management has raised its hiring target to 40,000 employees, which reflects the confidence in the demand environment. Infosys is expected to outperform its EBIT margin guidance of 130bpsYoY for FY11. We raise our EPS estimates by 0.5% and 2.9% for FY11 and FY12.

We maintain our Buy recommendation with a target price of Rs3,500 based on 23x FY12E.

Source : Equity Bulls

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