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The company's reiteration of FY12 constant currency revenue guidance despite worsening
macros suggests that focus is back on winning market share and execution after the reorganization. We raise our FY12/13F EPS by 5% each, building in improved demand visibility and
favourable currency movement.
Focus shift from re-organization to execution is showing results; reiterate Buy
Infosys surprised us positively by maintaining its FY12 constant currency (cc) revenue guidance,
despite worsening macros. All large verticals grew qoq, including telecom. 19 client additions in
emerging verticals (indicates strategy to diversify business and reduce earnings volatility), 10
clients additions in Europe and 23,000 campus offers for FY13 are positive. We believe that
Infosys offers better earnings flexibility than its peers in turbulent times, as reflected in its revised
FY12 EPS guidance. While we are positively surprised by 2HFY12 revenue guidance (cqoq)
growth guidance of 5.5% in 3Q12/4Q12 with 6.5% cc growth guidance for 3Q12 at the higher
end), we remain cautious on CY12 IT budgets. We raise our FY12/13 US$ revenue forecast by 1-
2%, building in comfort on FY12 guidance. Additionally, revised currency forecasts drive our
FY12/13F EPS increases of 5% each. We raise our TP to Rs3,000; despite the recent sharp runup in the stock, a weak macro news flow could potentially provide better entry points on dips, in
our view. Significant deterioration in the macroenvironment remains a key risk.
FY12 guidance revision: primarily adjusted for currency fluctuations
Infosys revised its FY12 US$ revenue growth guidance from 18-20% to 17.1-19.1%, building in
the adverse impact of cross currency in 2Q12. EPS guidance was revised upward by 11.5-11.6%
to Rs143.02-145.26, building in 85bp EBIT margin decline yoy versus 150bp earlier. This factors
in a 6% depreciation in the FY12 INR/USD rate versus the earlier guided rate.
2Q12 results: on expected lines, realization improvement is a positive surprise
2Q12 revenues were up 4.5% (5.0% in cc) vs guidance of 3.5-5.0%, driven by IT Services volume
growth of 4.5% qoq. Offshore realizations drove blended realization up by 0.5% despite a 0.5%
cc headwind and lower business transformation/innovation revenue streams. EBITDA margin was
up 201bp qoq to 29.1%, on rupee depreciation (3.6%) and higher utilization (+240bp ex-trainees).
Other income was down 12.6% qoq to Rs3.87bn, with forex loss of Rs330m (1Q12: Rs450m
gain). Consequently, PAT was up 10.7% qoq at Rs19.06bn.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The company's reiteration of FY12 constant currency revenue guidance despite worsening
macros suggests that focus is back on winning market share and execution after the reorganization. We raise our FY12/13F EPS by 5% each, building in improved demand visibility and
favourable currency movement.
Focus shift from re-organization to execution is showing results; reiterate Buy
Infosys surprised us positively by maintaining its FY12 constant currency (cc) revenue guidance,
despite worsening macros. All large verticals grew qoq, including telecom. 19 client additions in
emerging verticals (indicates strategy to diversify business and reduce earnings volatility), 10
clients additions in Europe and 23,000 campus offers for FY13 are positive. We believe that
Infosys offers better earnings flexibility than its peers in turbulent times, as reflected in its revised
FY12 EPS guidance. While we are positively surprised by 2HFY12 revenue guidance (cqoq)
growth guidance of 5.5% in 3Q12/4Q12 with 6.5% cc growth guidance for 3Q12 at the higher
end), we remain cautious on CY12 IT budgets. We raise our FY12/13 US$ revenue forecast by 1-
2%, building in comfort on FY12 guidance. Additionally, revised currency forecasts drive our
FY12/13F EPS increases of 5% each. We raise our TP to Rs3,000; despite the recent sharp runup in the stock, a weak macro news flow could potentially provide better entry points on dips, in
our view. Significant deterioration in the macroenvironment remains a key risk.
FY12 guidance revision: primarily adjusted for currency fluctuations
Infosys revised its FY12 US$ revenue growth guidance from 18-20% to 17.1-19.1%, building in
the adverse impact of cross currency in 2Q12. EPS guidance was revised upward by 11.5-11.6%
to Rs143.02-145.26, building in 85bp EBIT margin decline yoy versus 150bp earlier. This factors
in a 6% depreciation in the FY12 INR/USD rate versus the earlier guided rate.
2Q12 results: on expected lines, realization improvement is a positive surprise
2Q12 revenues were up 4.5% (5.0% in cc) vs guidance of 3.5-5.0%, driven by IT Services volume
growth of 4.5% qoq. Offshore realizations drove blended realization up by 0.5% despite a 0.5%
cc headwind and lower business transformation/innovation revenue streams. EBITDA margin was
up 201bp qoq to 29.1%, on rupee depreciation (3.6%) and higher utilization (+240bp ex-trainees).
Other income was down 12.6% qoq to Rs3.87bn, with forex loss of Rs330m (1Q12: Rs450m
gain). Consequently, PAT was up 10.7% qoq at Rs19.06bn.
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