Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infosys Technologies Neutral
INFY.BO, INFO IN
Infosys Q4 FY- A disappointing set of results and
disappointing INR EPS guidance; Consensus
downgrades likely; maintain Neutral
• A disappointing set of results and disappointing INR EPS guidance;
Consensus downgrades likely; maintain Neutral. Most important, we believe
the rupee EPS guidance for FY12 was very disappointing. Management guided
for 18%-20% US$ revenue growth in FY12, which is in line with our
expectation of guidance. But, the company guided for FY12 EPS of
Rs.126.05-128.21, which is significantly below our expectation. Consensus
rupee EPS estimate for FY12 is about Rs.150, which is 17% above the upper
end of the guidance. The spread between the guidance upper end and consensus
estimate has never been so high at least in the last 7-8 years. Consensus
downgrades for FY12 are likely.
• Infosys reported Q/Q US$ revenue growth of 1.1% in 4QFY11, significantly
below our and consensus estimate of above 4.0% growth, which we believe is
disappointing. The low growth was driven by volume decline of 1.4%, primarily
on the offshore side, where volumes declined 2.0%. This is the first quarter in
the past 7 quarters when volumes sequentially declined. Happily, pricing was
strong as constant currency billing rates were up 2.1%. We believe the only
positive thing coming out of the quarter was increased pricing.
• Operating margins of 29.0% declined 120 bps from last quarter, and were
meaningfully below our expectation. The margin contraction was primarily
driven by decrease at gross margins levels. We believe it is partially due to
lower utilization levels and operating leverage. Utilization rate (ex trainees)
declined by 550 bps to 75.2% from 80.7% last quarter.
• 4QFY11 EPS of Rs.31.8 was noticeably below our expectation of Rs.33.0, with
underperformance starting right from the revenue line.
• Mohandas Pai has resigned from the board effective from June 11, and this is
not a part of any succession planning according to the management.
• We would be looking for color on the reason for disconnect between the US$
revenue growth and rupee EPS guidance. Despite in line revenue growth
guidance for FY12, EPS guidance is significantly below our/consensus
expectation. We believe low operating margins and rupee appreciation are the
primary culprits. We would be seeking margin commentary for margin
deconstruction for FY12, whether it is because of wage inflation or investments.
If the latter, it is likely to be an Infosys-specific issue.
• TCS and Wipro continue to be our top pick and we stay Neutral on Infosys.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infosys Technologies Neutral
INFY.BO, INFO IN
Infosys Q4 FY- A disappointing set of results and
disappointing INR EPS guidance; Consensus
downgrades likely; maintain Neutral
• A disappointing set of results and disappointing INR EPS guidance;
Consensus downgrades likely; maintain Neutral. Most important, we believe
the rupee EPS guidance for FY12 was very disappointing. Management guided
for 18%-20% US$ revenue growth in FY12, which is in line with our
expectation of guidance. But, the company guided for FY12 EPS of
Rs.126.05-128.21, which is significantly below our expectation. Consensus
rupee EPS estimate for FY12 is about Rs.150, which is 17% above the upper
end of the guidance. The spread between the guidance upper end and consensus
estimate has never been so high at least in the last 7-8 years. Consensus
downgrades for FY12 are likely.
• Infosys reported Q/Q US$ revenue growth of 1.1% in 4QFY11, significantly
below our and consensus estimate of above 4.0% growth, which we believe is
disappointing. The low growth was driven by volume decline of 1.4%, primarily
on the offshore side, where volumes declined 2.0%. This is the first quarter in
the past 7 quarters when volumes sequentially declined. Happily, pricing was
strong as constant currency billing rates were up 2.1%. We believe the only
positive thing coming out of the quarter was increased pricing.
• Operating margins of 29.0% declined 120 bps from last quarter, and were
meaningfully below our expectation. The margin contraction was primarily
driven by decrease at gross margins levels. We believe it is partially due to
lower utilization levels and operating leverage. Utilization rate (ex trainees)
declined by 550 bps to 75.2% from 80.7% last quarter.
• 4QFY11 EPS of Rs.31.8 was noticeably below our expectation of Rs.33.0, with
underperformance starting right from the revenue line.
• Mohandas Pai has resigned from the board effective from June 11, and this is
not a part of any succession planning according to the management.
• We would be looking for color on the reason for disconnect between the US$
revenue growth and rupee EPS guidance. Despite in line revenue growth
guidance for FY12, EPS guidance is significantly below our/consensus
expectation. We believe low operating margins and rupee appreciation are the
primary culprits. We would be seeking margin commentary for margin
deconstruction for FY12, whether it is because of wage inflation or investments.
If the latter, it is likely to be an Infosys-specific issue.
• TCS and Wipro continue to be our top pick and we stay Neutral on Infosys.
No comments:
Post a Comment