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Infosys reported another strong set of quarterly numbers, led by robust volume growth and uptick in onsite pricing. Management raised its FY11 USD revenue growth guidance to 24-25%YoY (from 19-21%YoY previously) validating the confidence in the demand environment, which would underpin growth going forward.?
?Infosys revenues grew 12.1%QoQ to Rs 69470 million whereas USD revenue rose 10.2%QoQ to USD 1496 million. EBIT margin improved 190bpsQoQ to 30.2% led by cross currency movement and higher utilisation. Infosys reported EPS of Rs 30.4 (up 16.8%QoQ). US saw 7.7%QoQ growth, Europe surprised positively; recording growth of 18.3%QoQ and India grew 36%QoQ. This demonstrates strength in the demand environment globally. Among verticals, BFSI grew 8%QoQ, retail surged 20.2%QoQ, and telecom and manufacturing which were struggling in the past rose 3.9%QoQ and 6.8%QoQ respectively. Infosys won nine large outsourcing deals in H1, of which a few are more than USD100mn. It has a strong deal pipeline of large transformational deals. Its top 10 clients grew 12.7%QoQ.?
?Increase in USD revenue guidance includes outperformance of this quarter but implied Q4FY11 revenue growth guidance appears muted at 1.4%QoQ. Management has raised its hiring target to 40,000 employees, which reflects the confidence in the demand environment. Infosys is expected to outperform its EBIT margin guidance of 130bpsYoY for FY11. We raise our EPS estimates by 0.5% and 2.9% for FY11 and FY12. We maintain our Buy recommendation with a target price of Rs 3500 based on 23x FY12E
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