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Infinite came out with its 4QFY12 results, in-line with our estimates. The company has shown positive volume
growth of 0.5% to $53.1mn after two quarters of sequential decline. The FY12 revenue of $220.7mn and EPS of
INR 27.7 exceeded company's guidance. The company has guided towards a 30% USD revenue growth in
FY13E. We expect the company to exceed their EPS guidance of INR 34.3 in FY13E growing at 25.2%. With
higher than industry average growth rates we expect a rerating of the stock from the current 3x LTM PE
multiple to 5x with a target price of INR 190.
4QFY12 and FY12 Revenues - return to growth
The company witnessed a sequential revenue growth of 0.5% in
4QFY12 to $53.1mn (3.1% decline YoY). The onsite pricing declined
by 1.5% with stable offshore pricing. FY12 revenues of $220.7mn
(SPAe: $220mn) grew 14% on the back of growth from BFSI and
healthcare verticals (Others, up by 229% YoY).
Margins decline
Infinite witnessed a 468bps decline in EBITDA Margins for 4QFY12
(15.3%) over 3QFY12 due to (i) higher one-time contract manpower
cost with one of the largest customer's transition project coming
to end and (ii) INR appreciation. In FY12 the EBITDA Margins
expanded by 59bps to 17.3% but higher tax outgo caused a lower
PAT growth of 12.6% to INR 1,207mn
Growth Avenues
The company has hinted towards a USD revenue growth rate,
higher than industry growth rate, at 30% for FY13E. The EBITDA
Margins are expected to be lower at 16% from the FY12 margins
of 17.3% as the company expects to invest the surplus into
extending its next generation 3G messaging platforms products.
We expect the company to meet its revenue guidance on the
back of higher growth from recent deal wins and product
launches.
Outlook and Valuation
Infinite has exceeded its FY12 revenues and margin guidance on
the back of higher growth from BFSI and Healthcare verticals
and INR depreciation. We expect the growth momentum to
continue on the back of marquee deals (Messaging Platform)
and products (to be launched in 2QFY13). We have factored in a
USD revenue growth of 21%/25% for FY13E/FY14E. We expect the
margins to come off a bit due to (i) higher product investments
(ii) Visa Costs hence contract manpower increasing and (iii)
Wage Inflation though partially offset by INR depreciation. We
have factored EBITDA Margins of 16.9%/17.7% for FY13E and
FY14E. Thus on the back of higher than industry growth, stable
margins and exceeding company's guidance, we expect the stock
to be re-rated upwards. We continue to recommend BUY for the
stock with a 2 year target price of INR 190.0 based on 5x FY14E
earnings of INR 38.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Infinite came out with its 4QFY12 results, in-line with our estimates. The company has shown positive volume
growth of 0.5% to $53.1mn after two quarters of sequential decline. The FY12 revenue of $220.7mn and EPS of
INR 27.7 exceeded company's guidance. The company has guided towards a 30% USD revenue growth in
FY13E. We expect the company to exceed their EPS guidance of INR 34.3 in FY13E growing at 25.2%. With
higher than industry average growth rates we expect a rerating of the stock from the current 3x LTM PE
multiple to 5x with a target price of INR 190.
4QFY12 and FY12 Revenues - return to growth
The company witnessed a sequential revenue growth of 0.5% in
4QFY12 to $53.1mn (3.1% decline YoY). The onsite pricing declined
by 1.5% with stable offshore pricing. FY12 revenues of $220.7mn
(SPAe: $220mn) grew 14% on the back of growth from BFSI and
healthcare verticals (Others, up by 229% YoY).
Margins decline
Infinite witnessed a 468bps decline in EBITDA Margins for 4QFY12
(15.3%) over 3QFY12 due to (i) higher one-time contract manpower
cost with one of the largest customer's transition project coming
to end and (ii) INR appreciation. In FY12 the EBITDA Margins
expanded by 59bps to 17.3% but higher tax outgo caused a lower
PAT growth of 12.6% to INR 1,207mn
Growth Avenues
The company has hinted towards a USD revenue growth rate,
higher than industry growth rate, at 30% for FY13E. The EBITDA
Margins are expected to be lower at 16% from the FY12 margins
of 17.3% as the company expects to invest the surplus into
extending its next generation 3G messaging platforms products.
We expect the company to meet its revenue guidance on the
back of higher growth from recent deal wins and product
launches.
Outlook and Valuation
Infinite has exceeded its FY12 revenues and margin guidance on
the back of higher growth from BFSI and Healthcare verticals
and INR depreciation. We expect the growth momentum to
continue on the back of marquee deals (Messaging Platform)
and products (to be launched in 2QFY13). We have factored in a
USD revenue growth of 21%/25% for FY13E/FY14E. We expect the
margins to come off a bit due to (i) higher product investments
(ii) Visa Costs hence contract manpower increasing and (iii)
Wage Inflation though partially offset by INR depreciation. We
have factored EBITDA Margins of 16.9%/17.7% for FY13E and
FY14E. Thus on the back of higher than industry growth, stable
margins and exceeding company's guidance, we expect the stock
to be re-rated upwards. We continue to recommend BUY for the
stock with a 2 year target price of INR 190.0 based on 5x FY14E
earnings of INR 38.
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