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Infosys Technologies
Assuages fears of demand
slowdown
„H2 FY12 guidance cheers
Infy delivered a largely inline Q2 but cheered market by maintaining FY12 rev
guidance on constant currency basis (inline with our expectation, better than the
cut street was fearing). Moreover, FY12 EPS guidance was raised by 11% ahead
of our/street estimates of ~5%. While led by Rupee depreciation, we believe the
extent of raise reflects confidence in earnings outlook, likely boosted by improved
operational metrics’ seen this quarter. We believe the company is beginning to
settle down post its re-organization and are raising our FY12-14 EPS estimates
by 1-9%. Retain Buy with increased PO of Rs3,000 (18x FY13E) but post recent
20% rally, this leaves a modest upside potential of 10-15%. Key risks: a) Rupee
appreciation beyond Rs48 for next 2 quarters and b) Macro shock leading to cuts
in discretionary spends.
Demand indicators endorse our positive view on tech spend
Co’s US$ rev guidance implies ~4.5% CQGR over the next 2qtrs which is
impressive considering seasonality and increased macro risks. We were positively
surprised by co’s remark that “outlook in banking is more buoyant than 6months
back”. Large deal pipeline stays comparable to previous quarter with increasing
contribution from products / platforms. Quantum and quality of client adds was
strong this qtr while company held onto its hiring target for the year.
Q2 operational performance ahead of expectations
Volume growth of 4.4% in the quarter was marked by growth across verticals
(including telecom) while EBIT margin beat our expectation by 90bps on account
of higher-than-expected utilization rate. Quarterly attrition rate at 20.5%, while still
a touch above comfort level, trended down on a sequential basis. Realization in IT
services went up by 1% qoq on a constant currency basis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infosys Technologies
Assuages fears of demand
slowdown
„H2 FY12 guidance cheers
Infy delivered a largely inline Q2 but cheered market by maintaining FY12 rev
guidance on constant currency basis (inline with our expectation, better than the
cut street was fearing). Moreover, FY12 EPS guidance was raised by 11% ahead
of our/street estimates of ~5%. While led by Rupee depreciation, we believe the
extent of raise reflects confidence in earnings outlook, likely boosted by improved
operational metrics’ seen this quarter. We believe the company is beginning to
settle down post its re-organization and are raising our FY12-14 EPS estimates
by 1-9%. Retain Buy with increased PO of Rs3,000 (18x FY13E) but post recent
20% rally, this leaves a modest upside potential of 10-15%. Key risks: a) Rupee
appreciation beyond Rs48 for next 2 quarters and b) Macro shock leading to cuts
in discretionary spends.
Demand indicators endorse our positive view on tech spend
Co’s US$ rev guidance implies ~4.5% CQGR over the next 2qtrs which is
impressive considering seasonality and increased macro risks. We were positively
surprised by co’s remark that “outlook in banking is more buoyant than 6months
back”. Large deal pipeline stays comparable to previous quarter with increasing
contribution from products / platforms. Quantum and quality of client adds was
strong this qtr while company held onto its hiring target for the year.
Q2 operational performance ahead of expectations
Volume growth of 4.4% in the quarter was marked by growth across verticals
(including telecom) while EBIT margin beat our expectation by 90bps on account
of higher-than-expected utilization rate. Quarterly attrition rate at 20.5%, while still
a touch above comfort level, trended down on a sequential basis. Realization in IT
services went up by 1% qoq on a constant currency basis.
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