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INFOSYS LTD.
Revival of fortunes
Revenue growth revival affirms our positive view: Infosys’ FY2Q12 numbers indicated
a turnaround in revenue trajectory – the constant currency revenue growth rate
accelerated from 3% qoq for the June quarter to 5% for the September quarter, and
management guided for 6% qoq for the December quarter. We believe that Infosys’
revenue underperformance story could be over and that the company could deliver topline growth ahead of its peers going forward. The strong increase in EPS guidance to
Rs143-145 (from Rs128-130 earlier; consensus Rs137) though largely on the back of
currency movements also signals an improvement in management confidence.
FY2Q12 results at middle of the guided range: Even though the Sep-11 quarter results
provided no fireworks, they were good enough to beat the recent muted expectations.
Revenue of US$1,746mn (+4.5% q/q, 16.7% y/y, +5% q/q in constant currency terms)
was at the mid point of previous guidance of US$1,730-1,755mn and showed an uptick
from 3.1% the previous quarter. Rupee net profit for the quarter at Rs19.06bn was in
line with consensus at Rs18.80bn and our forecast of Rs19.13bn.
Operating metrics signalling a turnaround: Infosys has seen a pickup in hiring even as
attrition has come down. New client signing saw an uptick (45 new clients in FY2Q12)
while volume growth (+4.5% in cc) and pricing (+1% in cc) remained strong.
Expect a change in sentiment: A turnaround in revenue growth, a significant increase
in EPS guidance and improving metrics should change investor sentiment towards the
stock. As expectations reset, we believe Infosys could be the strongest performer in the
Indian IT Services space. We maintain our 1-OW rating and 12-month price target of
Rs3,050. We raise our estimates slightly on the back of positive trends for the quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INFOSYS LTD.
Revival of fortunes
Revenue growth revival affirms our positive view: Infosys’ FY2Q12 numbers indicated
a turnaround in revenue trajectory – the constant currency revenue growth rate
accelerated from 3% qoq for the June quarter to 5% for the September quarter, and
management guided for 6% qoq for the December quarter. We believe that Infosys’
revenue underperformance story could be over and that the company could deliver topline growth ahead of its peers going forward. The strong increase in EPS guidance to
Rs143-145 (from Rs128-130 earlier; consensus Rs137) though largely on the back of
currency movements also signals an improvement in management confidence.
FY2Q12 results at middle of the guided range: Even though the Sep-11 quarter results
provided no fireworks, they were good enough to beat the recent muted expectations.
Revenue of US$1,746mn (+4.5% q/q, 16.7% y/y, +5% q/q in constant currency terms)
was at the mid point of previous guidance of US$1,730-1,755mn and showed an uptick
from 3.1% the previous quarter. Rupee net profit for the quarter at Rs19.06bn was in
line with consensus at Rs18.80bn and our forecast of Rs19.13bn.
Operating metrics signalling a turnaround: Infosys has seen a pickup in hiring even as
attrition has come down. New client signing saw an uptick (45 new clients in FY2Q12)
while volume growth (+4.5% in cc) and pricing (+1% in cc) remained strong.
Expect a change in sentiment: A turnaround in revenue growth, a significant increase
in EPS guidance and improving metrics should change investor sentiment towards the
stock. As expectations reset, we believe Infosys could be the strongest performer in the
Indian IT Services space. We maintain our 1-OW rating and 12-month price target of
Rs3,050. We raise our estimates slightly on the back of positive trends for the quarter.
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