Infosys Q1FY10 result was ahead of market expectations. Against expectation of Rs. 2424.5 EPS, Infosys reported EPS of Rs. 26.63 in Q1FY10.

Better performance was on account of higher gross profit margin and higher operating margin.

Revenue though declined by 2.9% QoQ in Rupee terms but up by 0.09% QoQ in dollar term, even PAT declined by 5.3% QoQ in rupee terms but increased by 2.49% in dollar terms.

Volume saw a decline of 1.06% QoQ but was compensated by pricing increase of 1.0% in dollar terms.

Tax rate increased sharply from 8.8% in Q1FY09 and 15.8% in Q4FY09 to 20.3% in Q1FY10

The Annual EPS & revenue guidance revised down ward in rupee terms but held? up in dollar terms. This was mainly on account of rupee appreciation in last 3 months.

The annual EPS guidance was held up even after factoring higher tax rate of 20% instead of 17% factored earlier. Company has factored in decline of 150 basis points in annual operating margin instead of earlier 300 basis points decline.

Even the Revenue guidance for Q2FY10 is also flat in dollar terms but declining QoQ in rupee terms.

Infosys has guided for decline in QoQ EPS by around 8% in dollar terms on account of increase in sales and marketing expenses.

The Gross addition of employee was also one of the lowest at 3538 in many quarters and even the net addition was negative at 945.

We are getting initial indication of stabilization of operation though management has still hold up on its expectation of meaning full recovery only in second half of CY10.

Though the pressure on pricing for Infosys might have relaxed for now, the volume growth is still away. At current price of Rs. 1727 Infosys is trading at PE multiple of 17.5 for FY10E estimated EPS of Rs. 98, which leaves little upside from current level in near term.