Macquarie downgrades Infosys to 'Neutral'

MUMBAI: Macquarie has downgraded Infosys Technologies to ‘ Neutral’ after the IT bellwether disappointed by missing its muted 4Q guidance and provided poor revenue guidance for FY13. It doesn’t see the 12 per cent sell-off as overdone.

“We do not think that Infosys management is building in extra caution while guiding for 8-10% US$ revenue growth next year. Given the delay in new project launches seen by Infosys in March, we think a significant beat on 1Q guidance is difficult.

This implies the CQGR ask rate for the remaining three quarters to meet the 10% growth target would be 5%. With a fluid macro environment and the company facing a slowdown in its largest vertical, chances of beating the 5% CQGR are slim, in our view,” the report said.

Macquarie is of the view that better earnings performance from other IT vendors during the next two weeks can further weaken the investment argument for Infosys

It has reduced Infosys’ FY13/FY14 EPS by 4%. “Our new DCF-based target price of Rs 2450 (was Rs2950) implies a target PER multiple of 15x,” it added.