Tirthankar Patnaik, Director-Institutitonal Research, Religare Capital Markets
Post Narayan Murthy's return, Infosys has registered an improved performance from most operational metrics and is the biggest beneficiary of a potential tech demand recovery in the US. Moreover, the management's conservative guidance of 10% dollar growth for FY14 could provide room for positive surprise. Despite the recent rally, the stock still trades at in the range of 14-15% discount to TCS on FY16 earnings and has a room for expansion if growth continues to improve.
The Satyam merger has made Tech Mahindra the fifth largest IT Services company in the country. The deal-win momentum has also been very healthy with the company announcing 13 deals in Q2. Win rates for deals > $5mn TCV have been improving and the deal pipeline remains healthy with 5-6 large deals. Moreover, the increased scale would help the company continue the deal-win momentum. Current valuation at approximately 13x FY15 P/E remains reasonable despite the stock's recent up-move. We believe that sustained growth performance ahead of industry levels and improved deal wins would be the key to further re-rating.
Text: Business Standard
Images: Reuters, PTI