Infinite Computer Solutions- Inline show, retain BUY: Emkay

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Infinite Computer Solutions

Inline show, retain BUY

BUY

CMP: Rs 181                                       Target Price: Rs 250

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n     An inline quarter with revenues at US$ 49.2 mn (+4.3% QoQ, +42.4% YoY). Margins improved QoQ to 16.7% with profits at Rs 271 mn (+6% QoQ,+33% YoY)

n     Rev growth led by ramp ups in top 5-10 client a/c’s. Co added 3 new clients during the quarter with an increase in US$ 1 mn+ bucket to 15 ( V/s 13 in Sep’10 qtr)

n     Employee addition is in line with co adding ~300 people on a net basis, with qtrly annualized employee attrition moving up ( similar to the trend at peers) to 12.2% 

n     Retain US$ revenue estimates with currency resets (at Rs 45/$ V/s Rs 44/$ earlier) driving a 3.2/5.9/2.5% increase in FY11/12/13E EPS to Rs 24.5/30.2/37.2. BUY, TP Rs. 250

Inline show all the way

Infinite’s Dec’10 qtrs report was in line with expectations across all parameters.

Revenues came in at US$ 49.2 mn (+4.3% QoQ, +42.6% YoY), which essentially

implies an asking rate of 4-14% sequential increase for March’11 to meet co’s guided

revenue range of US$ 190-195 mn (35-38% YoY growth).Operating margins improved

by ~10 bps sequentially to 16.7% despite strong employee addition ( net addition of

~290 people during the quarter taking the total count to 4,468). Profits at Rs 271 mn

(+6% QoQ, +33% YoY) met est (Emkay exp of Rs 277 mn) driven by an inline revenue

/margin show.

Top 5-10 client ramp ups drive growth, revenues from Motorola on track

While revenues from top client were down by ~9% sequentially, top 2- 5/ top 5-10 client

revenues increased by ~5%/36% sequentially. Co management noted that the strong

performance within the top 5-10 client ac’s was driven by ramp ups on iYogi , Motorola

and APDRP contract. Management maintained its confidence of accruing revenues of

~US$ 20 mn from the Motorola contract during FY11 with a step up increase to US$ 40

mn from FY12 onwards.

Tweak estimates marginally, maintain BUY with TP of Rs. 250

While we maintain our US$ revenue estimates broadly, our FY11/12/13 earnings

estimates stand upgraded by ~3.2/5.9/2.5% EPS to Rs 24.5/30.2/37.2 respectively

driven primarily by currency resets to Rs 45/$ V/s Rs 44/$ earlier. Currently the stock

trades at 7.4x/6.0x/4.9x our estimated EPS of Rs. 24.5/30.2/37.2 for FY11/12/13. We

maintain our BUY rating with target price of Rs. 250.