CLSA maintains 'Buy' rating on Infosys

Infosys
RESEARCH: CLSA
RATING: BUY
CMP: Rs 2364

CLSA maintains `Buy��� rating on Infosys. A look at Infosys��� historical outperformance of the September-quarter guidance, a ~1.5% q-o-q cross-currency tailwind and recent meetings with the Infosys COO and HR head make us confident that 3.5% q-o-q dollar revenue growth number for September ���09 will be surpassed.

The September ���09 quarter is just the start of a multi-quarter earnings upgrade cycle and the ���expensive valuation��� concerns will fade as earnings upsides kick in. Infosys will break out from the prevailing valuation equilibrium as current market consensus proves lower than reality.

While Infosys remains wary of any economic uncertainty and hence is not extrapolating this ���blip��� to a secular trend, CLSA attributes this cautious stance to typical Infosys conservatism. Investor concerns in Infosys have centred on ���expensive valuations���.

In CLSA���s view, the expensive valuation argument ignores the likely multi-quarter earnings upgrade cycle ahead and the potential of Infosys to re-rate in that scenario.