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Infosys reported Q1FY12 results touch below our expectation in a quarter, which had
multiple headwinds. However, the guidance for FY12 US$ revenue guidance was
unchanged below our expectation/consensus estimates. Below par performance
could lead to near-term pressure.
Results below expectation: Infosys’ revenue grew by 3.2% QoQ to Rs74.9bn for
Q1FY12 (Guid.: Rs73.5bn, PLe: Rs75.3bn, Cons: Rs75.1bn) in Indian rupee term,
whereas revenue in USD term grew by 4.3% to US$1671m (Guid.: $1651m, PLe:
$1684m). The company reported an operating margin erosion of 291bps QoQ to
26.1% (PLe: 27.4%, Cons: 27.4%) due to currency headwind of 1% for Q1FY12 (vs
Q4FY11) and wage hike. The company reported EPS of Rs30.14 (Guid: Rs27.81,
PLe: Rs30.62, Cons: Rs30.31), de-growth of 5.3% QoQ.
Geography and segments – NA and Retails shines, Europe and Telecom
disappoints: Revenue for NA and Europe grew by 5.1% and 0.5% QoQ,
respectively, whereas in terms of vertical, Retails and Telecom grew by 15.8%
and -7.1% QoQ, respectively. PES grew by 39.1% QoQ.
Pricing – pricing increase in‐line with expectation: The pricing improved by
1.2% QoQ (Onsite: +0.8%, Offshore: -0.4%). Guidance employee add: 45k (FY12)
Outlook – No guidance revision is below our/consensus estimates: Infosys has
not revised its USD revenue growth for FY12 (18-20% YoY growth, PLe: 20-22%).
Infosys has revised its rupee EPS guidance by 1.5% to Rs128-130 (PLe Rs130-
132), a growth of 8% YoY. For Q1FY12, Infosys guided for 4.3% QoQ revenue
growth to US$1743 and EPS guidance of Rs29.90 in rupee terms.
Valuations and Recommendation: We expect stock to correct after giving below
consensus guidance US$ revenue guidance. However, we are expecting earning
cut of 2-3% post Q1FY12. We may revisit our estimates post conference call
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