India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Infosys Technologies: Upbeat bottom-up, cautious top-down
Caution on macro uncertainty aside, our
discussions with Infosys management suggest a fairly upbeat mood on revenue growth
over the coming quarters. Staying true to its growth strategy, Infosys continues to drive
the push for a wider F-500/G-1000 footprint and few blockbuster accounts to drive the
next leg of growth. We remain bullish on revenue growth prospects for the Tier-I
players and believe 30% rev growth is possible for Infosys in FY2012E. BUY.
Management upbeat on near-term demand prospects; supply-side pressure easing
Key takeaways on demand/pricing/supply side
` Infosys management indicated strong visibility on near-term volumes. Early feedback from
clients suggests a modest uptick in overall IT budgets with greater outsourcing/off-shoring push
likely.
` Micro/macro divergence remains – micro, bottom-up indicators from the client base suggest
sustenance of demand momentum even as macro remains uncertain, at best.
` Infosys’ pricing commentary continues to differ from that of peers – the company continues to
indicate a stable pricing environment whereas peers have talked about an uptick in pricing.
` Supply-side situation continues to improve with attrition trending down month on month for
the past 4 months. Campus recruitment cycle has started – Infosys indicated plans to make
23,000-24,000 campus offers. The company does not see any medium-term worries on
attrition or talent demand/supply situation.
Medium-term growth strategy continues to revolve around F-500/G-1000 accounts
Infosys management continues to see significant opportunity in expanding its F-500/G-1000
footprint. The company currently has ~130 F-500 and ~180 G-1000 clients and is focused on
driving this number up. In addition, staying true to its strategy, Infosys remains focused on winning
a few new ‘blockbuster potential’ accounts to drive the next leg of growth. The company is
making investments in key geographies (notable continental Europe) and ramping up its
sales/consulting capabilities to this end.
30% revenue growth in FY2012E possible, in our view
We believe FY2012E has the potential to be a 30%+ constant currency revenue growth year for
Infosys (please see our sector note dated Dec 1, 2010 for details). Greater confidence on such a
scenario should mean further revenue/EPS upgrades, driving stock performance. We reiterate BUY.
Other key highlights from management meetings
` Infosys sees protectionism as the biggest medium-term challenge for the industry and is
taking measures to mitigate the risk. These include preparing recruitment/training
infrastructure at onsite locations and ramping up local hiring.
` Push for non-linearity continues with substantial investments on IP creating, solutions,
and platforms. The company did not rule out inorganic means to accelerate this push.
` The company indicated increased investments on shoring up consulting and package
implementation capabilities.
` China delivery footprint expansion is another key area of investment – Infosys indicated a
target of 10,000 strong China delivery organization (3,000 currently).
` Infosys sees cloud adoption as a big opportunity in the medium term. It did indicate that
it does not expect rapid cloud adoption for core applications by large enterprises.
No comments:
Post a Comment