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Infosys Technologies
Focus on diversified revenue growth
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Robust demand environment
Management reiterated that demand environment remains strong in verticals such
as banking & finance, retail & manufacturing. Offshoring gaining traction in most
key geographies. Infy has also expanded target client base and now taps in to
global 2000 clients as compared to Fortune 1000 earlier. It has a vision of
achieving a revenue target of over USD15bn by 2015 (implies over 25pc CAGR).
It is focusing on improving both revenue/person through mix and non linearity and
revenue/client.
Focus on non linearity
Management reiterated its goal to improve share of non linear revenues from
current 10% to over 30% over the medium term, driven by higher product
revenues such as finacle (Banking product) & FLypp (mobile platform) and
investments in platform based BPO. Management highlighted that revenue
productivity at its recent acquisition (Mccamish- insurance platform) stood at
USD110,000 vs company average of USD84,000.
Strong focus on geographical expansion
Infosys continues to invest in new geographies such as China, Latin America,
Europe and emerging markets. Reiterated long term goal of reducing
concentration in US markets from ~60% to 40% over next few years. Likely to
focus on M&A to enhance presence in Europe & Japan.
Likely to maintain margins at current levels
Management highlighted that barring currency volatility EBIT margins could be
sustained at current levels (our estmd FY11 margin is 29.6pc) by managing
employee pyramid, improving productivity, increasing share of non linear revs and
moving up the value chain. It intends to maintain balance between growth and
margins.
Price objective basis & risk
Infosys Tech (INFYF / INFY)
Our Price Objective of Rs4,000 (US$87 for ADR, at parity) is based on a target
FY12 EV/EBITDA to 2yr EBITDA growth of 0.85x, in-line with its 5yr avg multiple.
This implies a FY13e P/E of approximately 22x, broadly in line with current 1yr
forward (FY12e) PE. Downside risks to estimates stem from macro led delays in
IT spend or sharp appreciation of the Rupee.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infosys Technologies
Focus on diversified revenue growth
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„Robust demand environment
Management reiterated that demand environment remains strong in verticals such
as banking & finance, retail & manufacturing. Offshoring gaining traction in most
key geographies. Infy has also expanded target client base and now taps in to
global 2000 clients as compared to Fortune 1000 earlier. It has a vision of
achieving a revenue target of over USD15bn by 2015 (implies over 25pc CAGR).
It is focusing on improving both revenue/person through mix and non linearity and
revenue/client.
Focus on non linearity
Management reiterated its goal to improve share of non linear revenues from
current 10% to over 30% over the medium term, driven by higher product
revenues such as finacle (Banking product) & FLypp (mobile platform) and
investments in platform based BPO. Management highlighted that revenue
productivity at its recent acquisition (Mccamish- insurance platform) stood at
USD110,000 vs company average of USD84,000.
Strong focus on geographical expansion
Infosys continues to invest in new geographies such as China, Latin America,
Europe and emerging markets. Reiterated long term goal of reducing
concentration in US markets from ~60% to 40% over next few years. Likely to
focus on M&A to enhance presence in Europe & Japan.
Likely to maintain margins at current levels
Management highlighted that barring currency volatility EBIT margins could be
sustained at current levels (our estmd FY11 margin is 29.6pc) by managing
employee pyramid, improving productivity, increasing share of non linear revs and
moving up the value chain. It intends to maintain balance between growth and
margins.
Price objective basis & risk
Infosys Tech (INFYF / INFY)
Our Price Objective of Rs4,000 (US$87 for ADR, at parity) is based on a target
FY12 EV/EBITDA to 2yr EBITDA growth of 0.85x, in-line with its 5yr avg multiple.
This implies a FY13e P/E of approximately 22x, broadly in line with current 1yr
forward (FY12e) PE. Downside risks to estimates stem from macro led delays in
IT spend or sharp appreciation of the Rupee.
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