Dear All,
Forwarding you the Result Flash on Infosys Technology for 4QFY2011
Infosys reported its 4QFY2011 results which were way below street as well as our expectation. The revenues came in at US $1,602mn, a tepid growth of 1.1% qoq. This is primarily on the back of volume de growth of 1.4% qoq. Also, revenues from BFSI, its anchor vertical, declined by 0.7% qoq in constant currency terms. The cross-currency has benefited USD revenues by 0.3%. In rupee terms, revenues came in at Rs7,250cr, up merely 2.0% qoq on the back of 1.1% qoq INR depreciation against USD in 4QFY2011. The EBIT margin declined by 122bp to 29.0% v/s our expectation of 30.4% due to poor utilizations dropping off by ~500bp qoq (excluding trainees). PAT stood at Rs1,818cr, 2.1% qoq growth, aided by higher other income of Rs415cr v/s Rs290cr in 3QFY2011.
4QFY2011: Result highlights (IFRS, Consolidated)
| (Rs cr) | 4QFY11 | 4QFY11E | % Var | 3QFY11 | % chg (qoq) | 4QFY10 | % chg (yoy) |
| Net revenue | 7,250 | 7,531 | (3.7) | 7,106 | 2.0 | 5,944 | 22.0 |
| EBIT | 2,102 | 2,290 | (8.2) | 2,147 | (2.1) | 1,789 | 17.5 |
| EBIT margin (%) | 29.0 | 30.4 | (142)bp | 30.2 | (122)bp | 30.1 | (110)bp |
| PAT | 1,818 | 1,898 | (4.2) | 1,780 | 2.1 | 1,600 | 13.6 |
| EPS (Rs) | 31.8 | 33.3 | (4.4) | 31.2 | 2.0 | 28.9 | 10.1 |
Other key highlights:
· Hiring remained strong with gross addition of 8,930 employees.
· Attrition declined to 17.0% (LTM basis) v/s 17.5% in 3QFY2011
· Utilisation (including trainees) declined by 420bp to 68.4% v/s our expectation of 72.2%
· In constant currency terms, geographies Europe and Rest of the world grew by 1.6% and 2.1% qoq; however, North America declined by 0.5% qoq
· In constant currency terms, Industry segments like Manufacturing and Retail grew by 5.0% and 1.0% qoq; however, BFSI and Telecom declined by 0.7% and 4.8%.
· Client addition was modest at 34 clients this quarter.
· The company has guided for 18-20% yoy growth in USD revenues to US $7.13- US $7.25bn for FY2012, which is inline with our expectations. EPS guidance for FY2012 stands at US $2.83-US $2.88, yoy growth of 8-10%; lower growth as against revenues due to continued investments in growth and factoring rupee appreciation against USD yoy for FY2012.
· Also, T.V. Mohandas Pai, Head-HR, has resigned from the company and the Board. According to the management, it has nothing to do with succession plans of the company; he is looking at larger role in public life.
Overall the results were disappointing. We wait for managements’ clarity on client specific issues if any which may have led to erosion in BFSI and Telecom. Also their expectation about the nature and quantum of client budgets for FY2012. We may revisit our target price of Rs3629 after clarity on above issues.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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