Why Infosys Should Be On Every Long Term Investors Watch List

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by Fun_Da_Mentalist, Oct 13, 2015.

  1. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
    Based on some very simple numbers there is some interesting money to be made in Infosys. In the Long term. I have attached some numbers based on an idle afternoons meanderings.
     

    Attached Files:

    nilesh67 and Srouta Mukherjee like this.
  2. Carl Icahn

    Carl Icahn Active Member

    Joined:
    Mar 25, 2015
    Messages:
    115
    Likes Received:
    92
    WoW! Infosys could be a 3.5x bagger by 2020! It would put a lot of mid-caps to shame. Can it really happen? I think there is a LOT of wishful thinking here. :)
     
  3. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
    If they do what they say they want to do, this is what the end result would look like. So it needs to be watched rather closely. But you are right, it sounds outlandish to even suggest what I have. But I know these guys; I mean the ones who have come on board. and man ! they are a devilishly smart and driven bunch.
     
  4. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
  5. Carl Icahn

    Carl Icahn Active Member

    Joined:
    Mar 25, 2015
    Messages:
    115
    Likes Received:
    92
    LOL Fantastic!!
     
  6. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

    Joined:
    Mar 28, 2015
    Messages:
    1,898
    Likes Received:
    769
    Good Analysis.
     
  7. stockjeet18

    stockjeet18 Member

    Joined:
    Mar 21, 2015
    Messages:
    121
    Likes Received:
    26
    I am feeling difficult while judging or understanding the IT companies... They are not mentioning where they are and where they will be ... Infosys... Did they announce any big deals til now ?... Sorry to compare this with auto ancillary company but I m just putting up the things ... Motherson got big order from Daimler benz so it gives confident about the future prospects and quality of the company... Likewise why these IT companies are not announcing their deals in pipeline clearly so that we can estimate their potential ... In banking space, tcs bancs (software) s far superior than Infosys products ... And tcs Chandrasekhar s vision and past record s good ...IMHO
     
  8. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
    I agree with all your observations. My interest in Infosys has been kindled by one factor only - Vikas sikka and the team he is building. Oh yes, the other things I like are :

    - the startup investment fund
    - the clarity in his strategic intent.

    Now all the volatility is in the speed and efficiency of execution
     
  9. RAMA MURTHY SASTRY CHALLA

    RAMA MURTHY SASTRY CHALLA Well-Known Member

    Joined:
    Sep 8, 2015
    Messages:
    3,688
    Likes Received:
    2,011
    in view there is a slow growth in IT companies , future projects and value , very high competition
    is there ....IT companies profits margins improvement are slowing down.....

    In my expectation :
    Year ....... Revenue in cr. ( expected ) ........ ..... Net Profit in Cr. ( expected )...... EPS ( expected )
    2019 ......... 85,000 Cr. ............. 20,000 Cr. ........ 175

    Current Market Price : Rs.1099.40

    My Price Expectation in the year 2020 : Rs. 2700
     
    San8422 and suchi like this.
  10. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
    which is a 2.5 X on a reasonably large base.

    While you are applying a profit margin of around 23.5% ( which is in line with todays margins, more or less) why then are you drastically reducing the earnings multiple ? This is not very clear to me.
     
    Last edited: Oct 14, 2015
  11. RAMA MURTHY SASTRY CHALLA

    RAMA MURTHY SASTRY CHALLA Well-Known Member

    Joined:
    Sep 8, 2015
    Messages:
    3,688
    Likes Received:
    2,011
    In my analysis Infosys got own weak points like Management instability every year Directors resignations
    and in software new projects profit margins are low compare to previous years ....

    If Europe and Greece problem is also still in pending , these problems temporary postponed to next year
    US is also not settled , china growth is also very slow that will impact to currency war , so many small countries they may reduce their currency values in Asia ....

    so many countries are giving competition in software field like Indonesia , Thailand etc...

    Infosys is cash rich but it is not diversified to other fields ....they are diversified in software area only

    so international pressure is also there , If India devalue its currency it is nullify due to others asian countries
    also devalue their currency in future so project margins may be low
     
    suchi likes this.
  12. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
    I understand your points but why I am not clear is :

    1. While you say profit margins will be lower in the future, in your calculations you have taken 22.5% of revenues as net profit. The current margin is around the same; give or take a couple of points.

    2. The margin calculations have not changed in your numbers. Yet, the multiple applied is 15 against the current 20. This is the part not clear.

    The only inference I have is that the sector will get derated. Why do you think this will happen? Anyway, the data point is as per your estimates we are looking at around INR 2,700. ok.
     
    Last edited: Oct 14, 2015
  13. prashant

    prashant Active Member

    Joined:
    Nov 18, 2015
    Messages:
    110
    Likes Received:
    86
    Dear Fun_Da_Mentalist,
    you are on right track . Lot of changes are happening in infy . Mindset is changing as product companies, non technical peoples feeling heat, bench strength coming down drastically, investment in products and lot of other initiatives. It will pay handsome benefits for sure .

    Thanks,
    Prashant
     
  14. San8422

    San8422 Active Member

    Joined:
    Jan 9, 2016
    Messages:
    112
    Likes Received:
    59
    Even if Infosys reaches Rs 2000 till 2020 it would be great. Banks are offering 8% on FD while Infosys would be growing @ 20% which is good for me. Its a large cap so there is some degree of safety. At least possibility of losing money that I have invested is very low. Being IT company it is not affected by US FDA, government policy, commodity prices etc... Also when compared to A.M.Naik, Anil Ambani etc... Vishal Sikka seems to be much better.

    Thanks for sharing.
     
  15. kharb

    kharb Well-Known Member

    Joined:
    Aug 15, 2015
    Messages:
    1,023
    Likes Received:
    735
    Rupee depriciation will help IT compnies and now IT may become play on rupee weakness.
     
  16. RAMA MURTHY SASTRY CHALLA

    RAMA MURTHY SASTRY CHALLA Well-Known Member

    Joined:
    Sep 8, 2015
    Messages:
    3,688
    Likes Received:
    2,011
    yes , but one point is also needed ...continuous projects and other countries and companies competition , effect profit margins ...if all countries currencies devalue then it will high competition for projects ....
    if world economy is slow down all industrial manufacturing and sales slow down that will lead to dependent industry IT also slow down , margins will effect even project maintenance also get effected ...

    Ex : in Economies slow down purchasing power will decreased , it leads to production cut , it leads to job cutting and unemployment rate increase , so government tax collection decrease , all countries impose closed economies .....so all these are leads to chain again
     
    Srouta Mukherjee likes this.
  17. adi16

    adi16 Member

    Joined:
    Dec 30, 2015
    Messages:
    63
    Likes Received:
    22
    I think there is definite possibility, but want to point out some the downside risks -
    1) slowdown in IT services spend (if we get into global recession or other factors)
    2) competition (high possibility)
    3) slow management execution
    4) senior management attrition rate.

    But i think the risk-reward is
    favorable
     
    Srouta Mukherjee likes this.
  18. San8422

    San8422 Active Member

    Joined:
    Jan 9, 2016
    Messages:
    112
    Likes Received:
    59
    That is a real concern especially w.r.t IT.

    If global recession comes then all sectors will be affected and share market will fall a lot. Forget about profits, we will end making tremendous losses. If there is a high possibility of global recession then it is better to reduce our exposure to share market. We must sell as much as shares as we can and go for bank FD(nationalised bank).

    We are investing on the assumption that global recession will not come.
     
  19. adi16

    adi16 Member

    Joined:
    Dec 30, 2015
    Messages:
    63
    Likes Received:
    22
    Hope NOT. But cant say, anything is possible, who thought we would be at this level few months back. And the way the world markets are right now, China being an economic 'pandora's box', US with longest bull run in history...
     
Loading...