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G l o o m b u t n o t d o o m …
We attended Infosys’ analyst day in Bangalore yesterday. SD Shibulal,
CEO effective August 21, highlighted the steps in building Infosys 3.0
wherein the company would earn 1/3 revenue from consulting, package
implementation & system integration (CSI, 26% of revenues currently),
business IT (BIT, ~65%) and products, platforms & solutions (PPS, 8-9%)
each. Notable steps include its efforts to alter customer contact points to
chief strategy officer level vs. traditional chief information officer (CIO)
level, reshaping its sales force and workshops with top 50 clients to
improve customer focus & delivery. Separately, from a macro
perspective, though there were no project cancellations, conservatism in
IT spending (pronounced in BFSI) and hesitancy for long-term deals has
crept in since last quarterly earning. Though this does not necessitate
immediate cuts in FY12 estimates, we believe, pertinent deterioration in
the macro could curtail CY12 client budgets and could dictate a revisit to
our FY13 estimates.
ƒ Vertical based commentary digest
BFSI - Conservatism has crept in yet no cancellations/deferrals have
happened so far. Clients are unwilling to sign long-term mega deals.
Regulatory & compliance spending continues to see demand uptick
as it is non-discretionary in nature. 65% of the IT budget continues to
be “Lights On” in nature, with the rest being discretionary
Telecom - Focus shift from wireline to wireless business is likely in
Q4FY12 led in part by rising deals wins. Revenue growth from
telecom vertical would likely continue to be tepid. Infosys is avoiding
commoditised business in the re-tendering process of one of its
largest client
V a l u a t i o n
We have maintained our FY12E/FY13E EPS estimates and expect
18%/13.5% CAGR rupee revenue/EPS growth during FY10-FY13E. We
continue to value Infosys at 20.9x our FY13E EPS estimate of | 160 and
maintain our STRONG BUY rating with a price target of | 3350. Though
we have maintained our estimates, pertinent deterioration in the macro
environment would create downward risks to our estimates
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
G l o o m b u t n o t d o o m …
We attended Infosys’ analyst day in Bangalore yesterday. SD Shibulal,
CEO effective August 21, highlighted the steps in building Infosys 3.0
wherein the company would earn 1/3 revenue from consulting, package
implementation & system integration (CSI, 26% of revenues currently),
business IT (BIT, ~65%) and products, platforms & solutions (PPS, 8-9%)
each. Notable steps include its efforts to alter customer contact points to
chief strategy officer level vs. traditional chief information officer (CIO)
level, reshaping its sales force and workshops with top 50 clients to
improve customer focus & delivery. Separately, from a macro
perspective, though there were no project cancellations, conservatism in
IT spending (pronounced in BFSI) and hesitancy for long-term deals has
crept in since last quarterly earning. Though this does not necessitate
immediate cuts in FY12 estimates, we believe, pertinent deterioration in
the macro could curtail CY12 client budgets and could dictate a revisit to
our FY13 estimates.
ƒ Vertical based commentary digest
BFSI - Conservatism has crept in yet no cancellations/deferrals have
happened so far. Clients are unwilling to sign long-term mega deals.
Regulatory & compliance spending continues to see demand uptick
as it is non-discretionary in nature. 65% of the IT budget continues to
be “Lights On” in nature, with the rest being discretionary
Telecom - Focus shift from wireline to wireless business is likely in
Q4FY12 led in part by rising deals wins. Revenue growth from
telecom vertical would likely continue to be tepid. Infosys is avoiding
commoditised business in the re-tendering process of one of its
largest client
V a l u a t i o n
We have maintained our FY12E/FY13E EPS estimates and expect
18%/13.5% CAGR rupee revenue/EPS growth during FY10-FY13E. We
continue to value Infosys at 20.9x our FY13E EPS estimate of | 160 and
maintain our STRONG BUY rating with a price target of | 3350. Though
we have maintained our estimates, pertinent deterioration in the macro
environment would create downward risks to our estimates
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