Infinite Computers board meeting on 11th April 2011 — to consider buyback:: BP Sec

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Infinite Computers board meeting on 11th April 2011 — to consider buyback

Infinite Computers Solutions (India) Ltd. has informed the exchange on 6th April 2011, that a meeting

of the Board of Directors will be held on 11th April 2011, to consider a proposal for buy-back of

equity shares. It stood out to be a real sentiment booster for the investor community, driving the

stock price up by 10.2% on 7th April 2011 to Rs 186.7. The stock has remained range bound in the

previous one month, and has under performed the market till 6th April 2011, rising 5.5% m-o-m compared

with the Nifty's return of 6.4% m-o-m. The stock had significantly outperformed the market in

past one quarter, falling 14.2% q-o-q as against Nifty's decline of 2.6% q-o-q. There has been a significant

increase in the volumes counter which was not so liquid reflecting increased investors interest

in the stock.

The company’s equity capital and Net worth stood at Rs. 439.6 mn and Rs 3,864.6 mn at the end of

Q3 FY11. Total reserves at the end of Q3 FY11 stands at Rs 3,425.0 mn. The current market cap as

on 7 th April stands at Rs 8.2 bn , we expect the company to buy back at least 10% of the current

market cap which is around Rs 820 mn, which reduces the Net worth by ~24%.

The average stock price of Infinite for the last 15 days and 6 months stand at Rs 163.4 and Rs 171.5

respectively, while the CMP stands at Rs 186.7, thus we expect the buyback price to be in the range

of Rs 190-210. Considering a buyback price of Rs 190, the company will buyback a total of 4.4 mn

shares taking the no of basic shares to 39.6 mn which will be EPS accretive going forward.

Q4 FY11E Result Expectation

The company has announced that it will publish Q4 FY11E results and audited Financial Results for

the year ended March 31, 2011 within 60 days from the end of the Financial Year. We expect the

company to give robust results for Q4 FY11E, primarily due to increased inflow from the Motorola

deal that too with increased revenue sharing in the quarter.

⇒ For Q4 FY11 we expect the company to post a top line of Rs 2,484 mn up 11.8% Q-o-Q and

33.3% Y-o-Y

⇒ In USD terms we expect the revenues to be US$ 54.6 mn up 10.9% Q-o-Q and 34.5% Y-o-Y

⇒ We expect the EBITDA Margins to expand by 57 bps Q-o-Q and 182 bps Y-o-Y to 17.2%

⇒ We expect the Adjusted Net Profit to come in at Rs 311 mn up 14.8% Q-o-Q and 41.1% Y-o-Y

⇒ Diluted EPS is expected to come in at Rs 7.07 up 14.8% Q-o-Q and 36.0% Y-o-Y

Outlook and Valuation

We maintain our bullish view on the company and expect revenue and earnings to grow by 26.1%

and 34.7% to Rs 11.1 bn and Rs 1.5 bn respectively in FY12E. The stock currently trades at a P/E of

5.6x and 4.4x FY12E and FY13E earnings which we think is at a steep discount to its peers considering

its high growth rate and healthy return ratios. We have not changed any of our estimates and

maintain our “BUY” rating on the stock with a target price of Rs 249.