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April 7, 2001
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Money > Business Headlines > Report April 7, 2001 |
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Jardine Fleming downgrades InfosysNetScribes/Sunil Joshi US-based investment banker Jardine Fleming Securities has downgraded Indian software major Infosys Technologies to 'market Performer' from 'buy', citing a slowdown in the workflow of clients like Goldman Sachs, Aetna and Nortel. "We expect 30-40 per cent of Infosys' business to see slower growth in FY02, pulling down revenue growth rates by 15-20 per cent to 30-40 per cent," JF Securities analyst Sandeep Dhingra says in a research note dated April 3, 2001. Dhingara expects lower growth numbers, pressure on billing rates and slower hiring momentum. "Our worst-case forecast puts Infosys' FY2002E earnings growth at just about 12 per cent," he says. The company's earnings growth in the first two quarters of FY2002 has been pegged at 5-8 per cent, and the utilization levels at 60-64 per cent. In the worst-case scenario, the company is expected to post total revenues of Rs 39.5 billion, and Rs 45.5 billion if market conditions improve. However, with the environment surrounding the industry - lengthening sales cycles, a slowdown in order booking and rising bench strength - unlikely to improve in the next six months, Dhingara says achievable long-term growth rates for Infosys are unlikely to be over 35-40 per cent. "The outlook could actually get worse even from here as the forecasts for tech spending in the US are being constantly scaled back. Though the low cost-high value proposition will ultimately make it attractive to outsource to Indian companies, it will take longer than envisaged," he adds. Though the weakness in the fundamentals seems to have already been factored into the current price of Infosys scrip, Dhingara says a trigger for out-performance will be seen only when the external environment improves or valuations fall to price in the worst case. "We expect the environment to remain uncertain for the next few months and the prices are still about 20-25 per cent away from pricing in the worst at Rs 3,000 to Rs 3,200," he says. |
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