Among peers, Infosys has the highest exposure to the US (61.7% of TTM revenue) and the BFSI segment (34.5% of TTM revenue). In the financial services space, it has strong relationships with Bank of America, Goldman Sachs, Citi, Wachovia and ABN Amro.

Infosys’ y-o-y growth in volumes has hit a five-year low of 17.3%. Looking at Infosys’ vertical and geographical concentration, we estimate volume deceleration has not yet bottomed out. We also expect pricing pressure to continue and, hence, Infosys offers poor visibility.

The company has guided to 4.8-5% revenue reduction in US dollar terms for FY09. This is especially troubling even though it says it is not seeing adverse client-specific impacts yet. In y-o-y growth terms, the 2H outlook (at the lower end) implies only a 6% growth in revenues over 2H08.

The stock currently trades at 12.2x FY09 and 13.6x FY10 estimated earnings. Our target price of Rs1,130 implies a target multiple of 10.9x its one-year forward earnings. At our target price, the stock would trade at 7.7x one-year forward EV/EBITDA estimate.

Our DCF valuation for Infosys assumes an 8.5% risk-free rate, a 6% risk premium and a 3% terminal growth rate. The DCF-based fair value, after considering estimated growth until FY10 and 10% during FY10-15, is Rs1,168.