vengabeats
Nilesh Nagdev
Broking house, ASK-Raymond James is bullish on Infosys Technologies. It has recommended a buy rating on the stock with a one-year price target of Rs 3,725 .. The ASK-Raymond James report on Infosys Technologies.. Progeon buyout imminent "The buyout of the residual stake (23%) in Progeon from Citigroup is imminent and the company expects it to close by July this year. The BPO arm is finding favour among customers and is expected to do USD 125 million in revenues in FY07 (USD 85 million in FY06). To facilitate this growth, the company expects to add about 6,000 employees (7,000 currently) in the current fiscal.. Banking product "The banking product of the company - Finacle, currently at about 2% of revenues, grew at 40% YoY in FY06. It is doing reasonably well in the APAC and Latin American markets. As a part of its go-to-market strategy for developed markets, the company is modifying the product to meet the stringent demands imposed by these markets... Forex management "As the company is not very aggressive in its foreign exchange management (compared to its peers like Wipro), every 100 bps change in INR-USD exchange rate impacts operating margins by 40-50 bps. The company primarily uses forwards and options to cover itself for the next three-six months and the hedged position at the end of March 2006 was USD 330 million... Premium pricing "The company expects to maintain its premium pricing leveraging its well-known execution capabilities. The pricing is stable as far as renewals are concerned (95% of the revenues of Infosys are from repeat business) whereas new customers normally come in at a premium of about 3-4%. Despite the premium pricing, it currently has 9 clients contributing above USD 50 million per annum (compared to 5 by the end of FY05) and expects to have about 3 to 4 USD 100 million p.a. clients by the end of this fiscal... Gearing for growth in future "The company is looking to add about 25,000 employees (overall) in FY07 (52,715 as on 31 March 2006). The expected capex is about USD 350-400 million in FY07. The company is adding about 5 million sq.ft. of office space every year to house its new employees... Focus areas "Going forward, Infosys is focusing on management consulting, technology consulting, package implementation, infrastructure management and system integration. It is also actively looking at acquisitions (the typical target would be smaller companies) either to expand into new geographies, new verticals or skill sets... Valuations "We estimate Infosys to grow revenues and profits at a CAGR of 31.5% and 31.0% respectively over FY06-08E. Strong, visible and sustainable growth with excellent return ratios (37-40%) will sustain the premium valuations and may improve over time. Despite the cur rent weakness in the price, related to the broader market correction, we reiterate our Buy rating with a 1-year price target of Rs 3,725 (about 25x rolling forward FY08 estimates)... Source:-Moneycontrol