Saturday, October 10, 2009

Infosys suggests better times ahead...........

Infosys suggests better times ahead; Q2 net up 7.5% YoY
BS REPORTERS Bangalore/Mumbai, 9 October

Setting a positive tone for the IT sectors quarterly earnings performance, Infosys Technologies, Indias second-largest IT services provider, marginally beat market expectations to post a 7.5 per cent increase in consolidated (Indian GAAP) net profit to touch Rs 1,540 crore for the second quarter ended September 30, 2009 against the corresponding period of the last financial year. Its top-line grew 3 per cent to touch Rs 5,585 crore.
Compared to the trailing quarter, the companys net profit moved up a shade under 1 per cent and its top-line rose 2 per cent.
The management attributed the growth to a recovery in business margins, favourable currency movements and greater traction in offshore projects. The company recorded a2.3 per cent growth in volumes on the back of a revival in IT spending by clients.
Net profit margins improved 114 basis points yearon-year, but declined 33 basis points sequentially to 27.6 per cent, due to a higher tax outgo for the quarter. Moreover, since more work moved offshore (that is, on Indian shores), the company could record a 3 per cent gain.
Under US-GAAP, however, revenues in the second quarter fell 5.1 per cent to $1.154 billion from $1.216 billion a year earlier, while net profit after tax declined 0.9 per cent to $317 million from $320 million.
Infosys recorded sequential revenue growth in US dollar terms, after witnessing a decline for the last three quarters.
"Clients are looking to invest in a few strategic initiatives and relationships to maximise value from opportunities when the economic downturn ends," Infosys CEO S Gopalakrishnan told reporters here today.
The markets initially reacted positively to his assertion that the business climate has improved. The Infosys stock opened around 1.6 per cent higher than its previous closing figure, but ended the day at Rs 2,178.35 — around 1.5 per cent down on the Bombay Stock Exchange.
Analysts attributed the fall to currency volatility (the strengthening rupee against the US dollar) which could significantly affect Infosys margins in the coming two quarters. Besides, analysts say the Infosys stock is currently valued at 22 times its earnings, which decreases the attraction of holding the stock.
Infosys has indicated that its third quarter (October-December 2009) revenues would see a decline of 1 to 2 per cent on a year-on-year basis, while its year-end revenues would also dip by 1-1.3 per cent.

My Comments:

True to my analysis, Infosys has given a better guidence for the coming year and that despite of the fact that Rupee is appreciating against dollar.

This anoucement comes in line of my view that I wrote in recent post that new frontiers are opening up for IT sector and they are European countries and as IT cos will now be dealing more with Euros and Pounds the loss they use to see with dollar depreciating will be minimized.There are many analyst who became negative on IT sector with dollar becoming weaker.

I was perhaps one of them who categorically wrote that IT sector can be a next sector to watch for in next bull run.....

Genesys Int which I recomended in my latest list has already started making new 52 week highs.....

In other sector Sudal Ind is making newer highs and has crossed half century mark....


  1. Time right to enter India: US to its companies - Economic Times
    11 Oct 2009, 1237 hrs IST, PTI

    WASHINGTON: Enamoured by India's status as one of the world's fastest growing economies, the US is telling its companies that the time is right for them to enter the Asian nation and high rate of return on investments is the most compelling reason.

    "Now is the time for US companies to enter the rising Indian market," according to an export promotion agency of the US government.

    For the US companies, the agency has named civil nuclear energy as the biggest potential Indian export market segment, estimated at about 150 billion dollars, followed by areas like renewable energy, aerospace and defense, mining and coal, security, healthcare, retail and auto.

    "India is a free-market democracy with a legal and regulatory framework that rewards free enterprise, entrepreneurship and risk taking," according to a report compiled by Export.Gov, a collaboration of the US Department of Commerce's International Trade Administration with 19 other federal agencies.

    The agency, which offers export assistance to the US companies on the behalf of the US government, has identified India as the 'market of the month'.

    The US exports to India stood at 32.44 billion dollars in 2008, an 85 per cent increase from the previous year. The US imports from India was 39.89 billion dollars in 2008, up 65 per cent from the previous year.

    == Question :== India will invest in Nuclear energy in the near future. So, which companies will benefit? L&T is one such company who have started investing in the sector. Are there any other promising companies for the next decade who will benfit from this?

    Thanks, Sanjay


    They have come up with a research report on the pipes industry as well as on PSL Ltd. They have set a one year target of Rs 250.

    Thank you for bringing to my attention this wonderful stock.

  3. Dear Mitz,
    It is matter of time when PSL will run.But according to me in a year the target maybe higher then 250....

  4. Dear Sanjay,
    I have written time and again on Areva T&D , Alsthom,Siemens,Thermax..and L&T...they are the players in Nuclear Power projects......They are the big ones and hence they are the main player.....
    There are wild cards like Walchandnagar Ltd same segment....

  5. Dear Rajeev,

    Even I agree to that. Infact the amount i have researched on PSL I am confident of a target of Rs 1000 plus in the next five to ten years.

    There is simply too much of demand that is forseen for Pipes in India and the US.

    PSL being indias largest company as well as having a factory in the US will benefit immensely.

  6. There is news that Parekh Aluminex CEO demands 6 crores as his annual pay package. I own 1000 shares of Parekh Aluminex. Does the CEO intention show lack of concern for investor's money? Your views please Rajeevji

  7. mk,
    I don't think it has any concerns.
    The co fundamentals remains the same.I like the co.