BofA sees a local price target objective of Rs3,200 (vs. Rs2,450) with a 6% to 7% earnings upgrade in 2014 and 2015. The call is also rerating the stock from a one-year forward target PE of 14-times up to 16-times and is narrowing the P/E discount. The firm’s interactions with senior management and in its channel checks look to remedy gaps in the services portfolio.
The upgrade also sees Infosys as a key beneficiary of any pick up in discretionary IT spending as business confidence returns and ticks up. It also expects in-line second quarter commentary to show an improving deal traction as a trigger for the stock. In short, this is a revenue recovery story against a depressed valuation.
We would advise that Infosys shares have already recovered handily off the summer and post-warning lows that took the ADRs in New York trading down from just over $55 down to under $38 as the ADR is now up around $48.00.
Infosys shares are still down about $0.10 at $48.05 so far today in the ADRs aginst a 52-week range of $37.93 to $61.48.
JON C. OGG
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