Murthy magic: Analysts upbeat on Infosys

Indian software services exporter Infosys Ltd met expectations on Friday with a 3.7 per cent year-on-year increase in quarterly net profit as contract wins and foreign exchange gains boosted earnings, lifting its shares 10 per cent in pre-open trade.

The company also maintained its forecast for 6-10 per cent revenue growth for the current 2013/14 financial year.

The results were better than analysts expectations. Here are the comments from analysts.

Dipen Shah, Head of Private Client Group Research, Kotak Securities

“The 4.1 per cent volume growth and 3.4 per cent constant currency growth were the highlights of the quarter. The better-than-expected revenue growth resulted in margins also coming in slightly ahead of expectations. The company has also increased the guidance on a constant currency basis, which is a positive."

"We expect the company, under the leadership of Murthy, to take steps to further improve employee engagement. We also expect the company to implement stricter performance measurement methods, which may lead to an improvement in the productivity levels of the company, going ahead. These measures should yield higher revenue and profit growth over the next few quarters.”

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Jagannadham Thunuguntla, Equity Head, SMC Global Securities

"A number of factors seems to have worked in their favour including a weaker rupee, Murthy coming back at the helm and the US economy looking up a bit. The stock was trading at a sharp discount to its peers on P/E multiples and this is the push the stock needed."

Phani Sekhar, Fund Manager, Angel Broking

"Generally you can conclude that the worst is over for them but it remains to be seen how quickly they can recover from here. We need to watch whether the management sees any air pockets going forward.

"You can ascribe it to Murthy magic. If they have deviated from their Infosys 3.0 strategy to focus on more mundane work at a lower price to bump up volume, that would be a good strategy and you can expect that kind of pragmatism from Murthy."

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Sandip Sabharwal, CEO, Portfolio Management Services, Prabhudas Lilladher

"It's a good start for earnings season. Infosys has beaten our lowered expectations. Guidance has been maintained and I think rupee guidance would be beaten as well.

"One shouldn't be too euphoric though for the stock as there are a lot of management and structural changes that need to happen."

Tarun Sisodia, Director, Chanakya Niti Pvt Ltd

"This is far better than what some people in the market were expecting. The earnings have been pretty volatile in the last few quarters and this time around the expectations were muted given what has happened in the company recently.

"I think the stock should now go for re-rating."

(With inputs from Reuters)