India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
First Read: Infosys Ltd
F Y12 revenue beat looks less likely
1Q revenue in-line; slight EPS miss due to lower margins
Infosys reported consolidated revenue of US$1.67bn up 4.3% QoQ, in-line with
our estimate. Volume growth came at 3.2% QoQ (vs. UBS-e 3.5%). EBITDA
margin declined 300bps (UBS-e 200bps) to 29.1% primarily due to 0.5% decline in
offshore pricing and increase in employee costs. Net profit declined 5.3% QoQ to
Rs17.2bn, slightly lower than our estimate of Rs17.4bn.
2Q guidance lowers probability of revenue beat in FY12
Infosys reiterated its FY12 US$ revenue guidance to 18-20% YoY and increased
its margin guidance by 50bp to a decline of 250bp YoY, in-line with our
expectations. However, 2Q dollar revenue guidance at US$1.73-1.76bn, a 3.5-5.0%
QoQ growth is lower than our estimate of 5-6% QoQ. This lowers the probability
and our confidence in the company’s ability to beat its FY12 revenue guidance.
While we still expect a beat on earnings guidance, we anticipate a 3-4% downside
risk to the consensus estimates, which are 6-7% ahead of revised EPS guidance.
Await TCS result to assess industry performance
We await TCS 1Q earnings announcement (due 14th July) to gauge if the issue is
company specific to Infosys led by internal restructuring. Infosys is currently
trading at a 5% discount to TCS, and we believe this discount could widen if TCS
reports in line/ahead of current consensus.
Valuation: retain Buy; revisiting our estimates
We are reviewing our estimates. Our PT is based on DCF. 12m price target Rs3,550.00/
Infosys Ltd
Infosys is the second largest IT services company in India with US$4.8bn
revenue and around 114,000 employees in FY10. Its services include application
development and maintenance, consulting services and package implementation,
business process management, infrastructure management, and testing services.
It provides these services to international clients through offshore development
facilities in India and other global centres. Infosys derives 66% of its revenue
from the US, 23% from Europe, and the rest from Asia Pacific.
Statement of Risk
A sharp decline in IT Services spending could result in downward revision of
our earnings estimates.
No comments:
Post a Comment