* While the appointment of Dr. Vishal Sikka is a good strategic move, we see some challenges in the short term.
* The products background of the new CEO will allow Infosys to grow its PPS business relatively faster. With the industry moving towards this business model, Infosys will have an advantage.
* Infosys will also likely benefit on the client business acquisition side due to Mr. Sikka's relationships with CXOs. The appointment also will likely remove several of the uncertainties in clients' minds, while dealing with Infosys.
* However, the exit of Mr. Narayana Murthy, while giving a free hand to Mr. Sikka, also leads to some discontinuity in operations. We also do not rule out the possibility of further restructuring under the new CEO.
* The new CEO will have to focus on improving growth rates in the services business while increasing the proportion of the PPS business.
* Our EPS for FY15 and FY16 stand marginally changed due to Rs.202 (Rs.207) and Rs.223 (Rs.231), based on Rs.59.5 / USD.
* We expect the stock to remain ranged in near term. However, we expect it to move up once there are indications of growth rate improving.
* We have been positive on the long-term demand prospects for quite some time. With the developed economies stabilizing, we do expect the demand scenario to improve over the next few quarters.
* Our TP stands at Rs.3579 (Rs.3714) based on 16x FY16 estimates. Maintain BUY.
Valuations and recommendations
* We value the stock based on FY16 estimates. We accord valuations which are at the lower end of the valuation band prevalent in FY10. Growth rate for Infosys had dropped in FY10 before recovering in FY11.
* We expect the stock to remain ranged in near term. However, we expect it to move up once there are indications of growth rates improving.
* We have been positive on the long-term demand prospects for quite some time. With the developed economies stabilizing, we do expect the demand scenario to improve over the next
* Our TP stands at Rs.3579 (Rs.3714) based on 16x FY16 estimates. We maintain BUY.
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