Motilal Oswal recommends 'buy' on Infosys, target Rs 3,260

Infosys' stock saw a spike in response to its 3QFY13 results and has moved in a range ever since. The brokerage believes that 3QFY13 may only have been the first quarter of a visible momentum in the company's growth, and that there is further upside in the stock from current levels, Motilal Oswal said in a report. The brokerage has a target price of Rs 3,260 for Infosys.

The brokerage presents a series discussing Infosys' potential to build upon its impressive 3Q performance, in the first of which, it makes a case for revenue growth convergence.

Exit rate of USD1,925m (INFY's 4QFY13 guidance) implies 4.8% organic revenue growth in FY14. Factoring 3Q outsourcing deals TCV of USD731m (assumed to accrue over five years and factoring revenues from TCV in PPS work out to organic

growth rate of 7.5% in FY14. Including full year revenues at Lodestone implies growth of 9.2%.

The brokerage sees an obvious upside to the above growth number because it assumes TCV of outsourcing deals only in 3QFY13, while INFY bagged 4 large outsourcing deals in 1Q and 6 deals in 2Q. Secondly it has also assumed no growth at Lodestone in FY14 and finally revenue recognition from PPS over five years v/s guidance of 3-5 years.


Infosys' pipeline in 2HCY12 improved over 1HCY12. This was largely an outcome of measures taken by the company to ensure growth revival, than any macro improvement. This is reflected in growth outperformance at Business IT Services (BITS) segment versus other segments in five out of the last seven quarters along with decline in constant currency realization in three out of the last four quarters.

Further, Nasscom's guidance of 12-14% growth in exports in FY14 is unlikely without growth acceleration at Infosys and Wipro, the report said.