MUMBAI: Shares of Infosys Technologies hit a life high on Friday on renewed demand for outsourcing in the US, and on hopes that the company will continue its record of beating its first quarter forecasts.
Infosys, which announces its April-June earnings on Tuesday, hit an all-time high of Rs 2,879.90 before closing up 1.63% at Rs 2,871.90.
“We have increased our target PE multiple for Infosys to 24 times one year forward earnings, given its expected earnings CAGR of 26% over FY10-12 E (against 24% earlier). However, key risks to Infosys stock remain a protracted global economic slowdown, currency volatility, and greater competition from multinationals, thereby increasing the pricing pressure,” said Deutsche Bank’s research analyst Aniruddha Bhosale.
The bank has revised its target price to Rs 3,500 from Rs 3,200. In many ways, financial performance of Infosys, which is the first among its peers to announce earnings, is considered an indicator of industry performance. Rival Tata Consultancy Services (TCS) will announce its first quarter results on July 15, followed by Wipro on 23 July and Tech Mahindra on 26. HCL Technologies, which follows July-June fiscal year, will declare results on 29 July.
In April this year, Infosys forecast a growth of 18.5-19.4% in first quarter revenue. Top outsourcing vendors including Tata Consultancy Services (TCS), Infosys and Wipro are hoping that a rebound in India’s top market for software exports, the US, accounting for over half of the business, can help them grow faster. According to financial brokerage firm CLSA, US-based customers will save nearly $18 billion in costs by offshoring to India during financial year ending March 2011.
“As tech spending recovers, we hope that Infosys’ numbers and forecast will be infectious for the entire industry,” said an analyst with a multinational brokerage firm in Mumbai who requested anonymity. Infosys normally beats its first quarter guidance by around 200 basis points and the full year guidance issued in April by 700 basis points, said another analyst with a domestic brokerage.