The earnings season have started in India and let me assure you that 2012 year will be as challenging as it was in the year 2011 for investors. In my previous post, we shared with you 24 companies that I am keeping a close eye for 2012.

Though out of those only two companies I was impress and found them trading at great discounts to its valuations. But yesterday after the results of Infosys and TTK Prestige, we noticed a great negative sentiments flowing for both counters and price falling down in range of 7-8% in both counters.

Did anything really changed in that business?

As a value investor my patience is always tested as the opportunities in good quality companies come in scarce.

In general, all the analyst’s were happy with the performance of third quarter results of Infosys. A zero percent growth in fourth quarter and no clear guidance for the 2013 are being taken as shock by the market.

The cues that I take from results of Infosys that USA and European economy will be facing many headwinds this year. The going won’t be easy in 2012.

Infosys is ranked as the second biggest IT Company of the nation and due to the World economy going through tough times and almost growing at lacklustre rate, will impact to its growth.

So, is it worth to invest in Infosys at these levels?

Many Analysts’ and even the management said that this year we will see EPS of Rs 138. Looking at the track record of Infosys management, they love to outperform their predictions or have always achieved their target.

Anything can go wrong in next two and half months and it is always safe to calculate values based on different forecast earnings and take a judgement. If I look with pessimistic view and expect EPS for 2012 to be Rs 130 then intrinsic value for 2012 comes to Rs 2,490.

Going forward many brokerage houses are expecting EPS for 2013 around Rs 160-65 range. If we expect EPS of Rs 155 for 2013 then the expected intrinsic value for Infosys in 2013 comes to Rs 2,942.

There is a discount of 12% available on our pessimistic EPS forecast for 2013. It looks a lot of uncertainty in the market as we are only two and a half months away from the end of financial year and management is unable to see or share with its shareholders, outlook for next 6 months (upcoming 3 quarters) too.

Now, if we go with management and analyst’s outlook then the intrinsic value for March 2012 comes to Rs 2,799 and looking forward for March 2013 the expected intrinsic value will be Rs 3,345.

The market price is trading at a discount of 23% to its 2013 valuations on management and many analysts’ point of view.

If you ask me personally, I would accumulate few if it falls below Rs2, 550 and will go with pessimistic view. But again that’s me and my reasons and style to go with my investments.

It is important to understand that you still have to do research on its management, their competitive advantage and build your view on long term prospects on Infosys.

The second stock that reported its third quarter results from the list was TTK Prestige.

TTk Prestige is another great brand and profitable business and is rated as ‘A2’ like Infosys from the given list. In March 2011 we valued this business for Rs 1,886 and we were looking value of this business in March 2012 of Rs 2,572.

They reported ROE in 2011 of 53% and it looks that they will report 46% for 2012 and that translates intrinsic value for March 2012 today of Rs 2,262.

If they manage to retain their ROE for 2013 same as 2012 year then we are looking intrinsic value for 2013 of Rs 3,004.

Looking at today’s price, it is trading at discount of 25% to its 2013 valuations.

The real question arises is will they will be able to sustain their ROE? Can they really earn EPS of Rs 135 per share in the year 2013?

There are not many research reports available on this company by research houses to my knowledge.

To make Rs 135 per share they will have to generate business of Rs 1,350 Crore. What do you think? Add your views below in comment section. We are in process of building knowledge bank and your contribution is valuable.

If you ask me then in my view, today, I don’t think they can achieve that sales figure. The high weighage of gloom over economy, I would go to expect ROE of 40% for the 2013 year and if I calculate the value then my expectations are that value won’t go anywhere. It will be at Rs 2,361 and you have a discount available of 4% to its 2013 values.

Again this is my personal view and you have to do your own research on its competitive advantage, management and prospects of this business before investing.