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We recently met the management of Infosys at their corporate
office in Bangalore. Following are the key points of discussion.
Clients’ budget are flat to marginally negative – Clients have
largely finished their budget exercise and at this moment it indicates
that budgets are flattish to negative. The momentum in project ramp
ups is expected to begin from Q1FY13.
Bid to outperform NASSCOM projections; guidance likely to be
conservative though – The company has not given indication for
next year but expects to beat NASSCOM projections of 11-14%
growth in FY13. According to the management, Q4FY12 guidance is
realistic. Q4 guidance was given at INR/USD rate of 52 and expected
30bpsQoQ decline in margin which could now be higher in the range
of 180-200bps due to rupee appreciation in the current quarter.
BFSI steady and emerging verticals are looking good – BFSI is
steady except capital markets which are showing some weakness.
Retail, Life Sciences and Energy & Utilities are showing traction.
Telecom will be weak due to shift in services from wireline to wireless
pulling down the growth but efforts in wireless will absorb some of
this. Focus on Products, platforms and Solutions (PPS) - Among
services lines, PPS will be the focus area along with steady efforts in
ADM. Acquisitions might be target to gain platforms which will also
help to increase non-linear revenues.
VISA rejection rates and the impending litigation – Due to political
backlash VISA rejections have increased but this will either result in
increased offshoring or hiring locals in the west. We believe the
solution lies in the mix of two and hence it should not significantly
dent the profitability. The litigation in US is continuing and all
support is provided by the firm.
23,000 campus offers, salary hike expected to be lower – The
campus offers are 23,000 for next year and the attrition is expected to
dip which will also result in lower salary increase (in the range of 9-
11%) compared to last two years.
Outlook and Recommendation – Infosys is likely to benefit from
improving situation in the west and expected financial stability. In
FY13, no significant pressure on operating margin due to lower
salary increment and stable currency compared to FY12 on an
average. Maintain ‘ACCUMULATE’ recommendation with a TP of
Rs3,200 based on 18x PER multiple on 18-months forward earnings.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met the management of Infosys at their corporate
office in Bangalore. Following are the key points of discussion.
Clients’ budget are flat to marginally negative – Clients have
largely finished their budget exercise and at this moment it indicates
that budgets are flattish to negative. The momentum in project ramp
ups is expected to begin from Q1FY13.
Bid to outperform NASSCOM projections; guidance likely to be
conservative though – The company has not given indication for
next year but expects to beat NASSCOM projections of 11-14%
growth in FY13. According to the management, Q4FY12 guidance is
realistic. Q4 guidance was given at INR/USD rate of 52 and expected
30bpsQoQ decline in margin which could now be higher in the range
of 180-200bps due to rupee appreciation in the current quarter.
BFSI steady and emerging verticals are looking good – BFSI is
steady except capital markets which are showing some weakness.
Retail, Life Sciences and Energy & Utilities are showing traction.
Telecom will be weak due to shift in services from wireline to wireless
pulling down the growth but efforts in wireless will absorb some of
this. Focus on Products, platforms and Solutions (PPS) - Among
services lines, PPS will be the focus area along with steady efforts in
ADM. Acquisitions might be target to gain platforms which will also
help to increase non-linear revenues.
VISA rejection rates and the impending litigation – Due to political
backlash VISA rejections have increased but this will either result in
increased offshoring or hiring locals in the west. We believe the
solution lies in the mix of two and hence it should not significantly
dent the profitability. The litigation in US is continuing and all
support is provided by the firm.
23,000 campus offers, salary hike expected to be lower – The
campus offers are 23,000 for next year and the attrition is expected to
dip which will also result in lower salary increase (in the range of 9-
11%) compared to last two years.
Outlook and Recommendation – Infosys is likely to benefit from
improving situation in the west and expected financial stability. In
FY13, no significant pressure on operating margin due to lower
salary increment and stable currency compared to FY12 on an
average. Maintain ‘ACCUMULATE’ recommendation with a TP of
Rs3,200 based on 18x PER multiple on 18-months forward earnings.
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