Target price: Rs 1,246
Prabhudas Lilladher has a reduce rating on Infosys Technologies considering that the outlook for the company and the software industry is rather weak in the short term.
While we expect Infosys to outperform most other players in the industry, we rate reduce stock with a target of Rs 1,246, said the report.
With a tough 10-year fiscal year and a full tax 11-year fiscal year, the company’s two-year earnings CAGR (FY09-11) is unlikely to exceed 10-15%, it added. According to the broker, the company will continue to be under pricing pressure in new contracts as competitive pricing behavior has become strong in new contracts.
While Infosys has noticed some weakness in the BFSI domain in the past, the outfit expects this weakness to extend to the retail and possibly manufacturing sectors as well. Among the various service lines, Enterprise Solutions is likely to be hit the hardest over the next few quarters, according to management, it added. The brokerage is also expecting another drop in Infosys’ US dollar guidance.