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Optimistic Revenue Guidance and dividend policy for FY13E auger well
Results Highlights
⇒ Infinite top-line in US$ terms increased marginally by 0.5% q-o-q but was down 3.1% y-o-y to
US$ 53.1 primarily due to continued ramp down from telecom vertical which was down 11.5% q-o
-q and 32.3% y-o-y.
⇒ Revenues in INR terms grew 7.7% y-o-y but was down 0.9% q-o-q to Rs 2.67 due to rupee appreciation
⇒ Net profits were down 47.3% q-o-q and 31.5% y-o-y to Rs 207 mn and diluted EPS stood at Rs
4.8 down 47.1% in the quarter. PAT margin declined by 683 bps q-o-q and 411 bps y-o-y to 7.8%
due to forex loss of Rs 54 mn in contrast to a forex gain of Rs 64 mn in the previous quarter
⇒ EBITDA margins contracted 467 bps q-o-q and 193 bps y-o-y to 15.3%, due to rupee appreciation,
investment in business and decline in top line.
⇒ Delays in payment from APDRP project of Uttarakhand resulted in flat revenue from India and
Debtor days remained high at 114 days in the quarter
⇒ Net employees reduced by 155 in the quarter, taking the total employee count to 3,988. This is
the fourth consecutive quarter of reduction in net employees primarily to problems from one main
client in IMS vertical in Europe.
⇒ Utilization stood at 90% in the quarter due to continuous decline in no of employees however we
believe it is at optimum levels and will decline going forward with fresher's hiring.
⇒ Free Cash flow continued to be positive in the quarter and stood at Rs 750 for FY12, despite not
receiving payments for the APDRP contract from government of Uttarakhand
⇒ Tax rate for the quarter stood at 25.5% (due to ending of tax benefits from STPI’s) and will remain
in the range of 25-26% for FY13E.
⇒ The company’s new dividend policy to pay 30% of its profit as dividend is a positive approach and
it declared a final dividend of Rs 4.5 in addition to an interim dividend of Rs 4.0.
Optimistic revenue guidance of 31% topline growth in FY13E — Positive
Infinite’s management is optimistic about the growth of the company due to some big deals wins expected
in the near term and ramp up from existing accounts, thus have given a guidance of 20% top
line growth and 11% PAT growth in US$ terms for FY13. In INR terms it expects top line to grow come
at Rs 13.8 bn up 31% y-o-y and PAT to grow 21% y-o-y to Rs 1.46 bn. This high growth expectation is
despite the decline in revenues from largest telecom client in FY12 and concerns over IT spending
especially in Europe. We believe new deals wins, growth from existing clients and rupee depreciation
will fuel the growth going forward
Margins to remain under pressure despite increase in non linear revenue stream
Management indicated only 21% increase in PAT for FY13E (top line expected to rise 31%) despite
higher portion of revenues from non linear revenue models, significant rupee deprecation and no major
hiring plans, which suggests that margins are going to be under pressure going forward. Main reason
cited were reinvestment in business and increased SG&A expenses, which we believe is required
in the tough environment to boost sales.
Outlook and Valuation
We increase our top-line estimate on account of expected clients wins (yet to be announced), rupee
depreciation and increase in business from existing clients. Our top line estimates for FY13E and
FY14E now stand at Rs 13.7 bn and Rs 16.2 bn up 29.9% and 18.2% respectively. EBITDA margins
for FY13E will contract by 81 bps to 16.5% due to reinvestment in business. We estimate EPS for
FY13E and FY14E to stand at Rs 32.2 and Rs 39.5 respectively. The stock currently trades at a P/E
of 3.2x and 2.6x FY13E and FY14E earnings which we think is at a steep discount to its peers considering
its healthy deal pipeline, high cash reserve of Rs 56/share, healthy return ratios and pretty good
cash flows generation. We maintain our “BUY” rating on the stock and maintain our target price of Rs
168 an upside of 63.3% from current levels
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Optimistic Revenue Guidance and dividend policy for FY13E auger well
Results Highlights
⇒ Infinite top-line in US$ terms increased marginally by 0.5% q-o-q but was down 3.1% y-o-y to
US$ 53.1 primarily due to continued ramp down from telecom vertical which was down 11.5% q-o
-q and 32.3% y-o-y.
⇒ Revenues in INR terms grew 7.7% y-o-y but was down 0.9% q-o-q to Rs 2.67 due to rupee appreciation
⇒ Net profits were down 47.3% q-o-q and 31.5% y-o-y to Rs 207 mn and diluted EPS stood at Rs
4.8 down 47.1% in the quarter. PAT margin declined by 683 bps q-o-q and 411 bps y-o-y to 7.8%
due to forex loss of Rs 54 mn in contrast to a forex gain of Rs 64 mn in the previous quarter
⇒ EBITDA margins contracted 467 bps q-o-q and 193 bps y-o-y to 15.3%, due to rupee appreciation,
investment in business and decline in top line.
⇒ Delays in payment from APDRP project of Uttarakhand resulted in flat revenue from India and
Debtor days remained high at 114 days in the quarter
⇒ Net employees reduced by 155 in the quarter, taking the total employee count to 3,988. This is
the fourth consecutive quarter of reduction in net employees primarily to problems from one main
client in IMS vertical in Europe.
⇒ Utilization stood at 90% in the quarter due to continuous decline in no of employees however we
believe it is at optimum levels and will decline going forward with fresher's hiring.
⇒ Free Cash flow continued to be positive in the quarter and stood at Rs 750 for FY12, despite not
receiving payments for the APDRP contract from government of Uttarakhand
⇒ Tax rate for the quarter stood at 25.5% (due to ending of tax benefits from STPI’s) and will remain
in the range of 25-26% for FY13E.
⇒ The company’s new dividend policy to pay 30% of its profit as dividend is a positive approach and
it declared a final dividend of Rs 4.5 in addition to an interim dividend of Rs 4.0.
Optimistic revenue guidance of 31% topline growth in FY13E — Positive
Infinite’s management is optimistic about the growth of the company due to some big deals wins expected
in the near term and ramp up from existing accounts, thus have given a guidance of 20% top
line growth and 11% PAT growth in US$ terms for FY13. In INR terms it expects top line to grow come
at Rs 13.8 bn up 31% y-o-y and PAT to grow 21% y-o-y to Rs 1.46 bn. This high growth expectation is
despite the decline in revenues from largest telecom client in FY12 and concerns over IT spending
especially in Europe. We believe new deals wins, growth from existing clients and rupee depreciation
will fuel the growth going forward
Margins to remain under pressure despite increase in non linear revenue stream
Management indicated only 21% increase in PAT for FY13E (top line expected to rise 31%) despite
higher portion of revenues from non linear revenue models, significant rupee deprecation and no major
hiring plans, which suggests that margins are going to be under pressure going forward. Main reason
cited were reinvestment in business and increased SG&A expenses, which we believe is required
in the tough environment to boost sales.
Outlook and Valuation
We increase our top-line estimate on account of expected clients wins (yet to be announced), rupee
depreciation and increase in business from existing clients. Our top line estimates for FY13E and
FY14E now stand at Rs 13.7 bn and Rs 16.2 bn up 29.9% and 18.2% respectively. EBITDA margins
for FY13E will contract by 81 bps to 16.5% due to reinvestment in business. We estimate EPS for
FY13E and FY14E to stand at Rs 32.2 and Rs 39.5 respectively. The stock currently trades at a P/E
of 3.2x and 2.6x FY13E and FY14E earnings which we think is at a steep discount to its peers considering
its healthy deal pipeline, high cash reserve of Rs 56/share, healthy return ratios and pretty good
cash flows generation. We maintain our “BUY” rating on the stock and maintain our target price of Rs
168 an upside of 63.3% from current levels
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