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Key result highlights
• Strong revenues; In-line margin – Infinite reported revenues of US$47.2m – up 11.2% qoq and 38.4% yoy – ahead of
IDFC exp of US$45.9m. INR revenues came at Rs2.2bn – up 13.3% qoq and 32.9% yoy – ahead of IDFC exp of
Rs2.1bn. Revenue growth was largely driven by volume growth; Motorola deal led to price realization improvement.
Sequentially, EBITDA margin was stable at 16.6% while EBIT margin inched up marginally to 15.2%. Lower other
income (swing from forex gain to loss) led to lower (5% qoq) increase in net profit at Rs256m (IDFC exp: Rs241m).
• Continue to strengthen client base – Added 3 key clients in telecom and utilities division – signed an MSA with (1)
leading global telecom OEM, (2) spinoff of a Telecom giant, (3) global provider of integrated software and hardware
and signed up a leading textile company for an ERP implementation.
• Strong hiring indicates confidence on business pipeline – Company had net hiring of ~410 technical employees
(~12% of quarter ago base) and TTM hiring of 63% (of year-ago base). Net hiring of 1H (~800) is comparable to the
total technical employees hired (~950) in FY10. Hiring and client acquisitions augur well for strong FY12 growth.
• FY11 outlook maintained: Company expects FY11 revenues to be US$190-195m (+35-38% yoy) and in INR terms to
be Rs8.55-8.77bn (+29-32% yoy). Net profit is expected to be Rs990-1,040m (+25-31% yoy). Company just needs 4%
CQGR over the next two quarters to meet its USD revenue guidance.
• Balance sheet and cash flow highlights – Core business DSO days decreased by 20 to 96; Capex of Rs228m; Net cash
increase of Rs224m; Declared dividend of Rs3/share (interim dividend of Rs2 and special dividend of Rs1);
• Other key highlights – Revenues from India grew by ~10% and from APAC grew by ~33%. Retail, manufacturing
and healthcare saw double digit revenue growth; US$5m clients inched up by 1 to 6. Company has range forward
contracts of US$36.6m and forward contracts of US$46.4m (Sept’10 end).
Valuations and View: Revenues and profits both were ahead of our expectations – we see Infinite Computer to grow
faster than mid-cap peers over coming quarters as Motorola, iYogi and R-APDRP deals remain in a ramp up mode. We
believe that there is upside risks to our existing estimates – stock trades at ~7x FY11E and ~6x FY12E EPS. We reiterate
Outperformer rating on Infinite stock with 12-month target price of Rs260 (based on 10x avg. FY11-12E EPS). Infinite
remains one of the key pick in small-cap IT services space.
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