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Peers See Discretionary
Spending and Better Pricing
– Can Infosys be Far Behind?
Quick Comment: Our FY12e/13e EPS estimates for
Infosys are 6%-10% higher than consensus and we
believe Street EPS will be revised upwards as Infosys’
volumes and pricing trends surprise positively in the
coming quarters. We expect strong absolute and relative
returns in Infosys stock in 2HCY11. Maintain OW.
Joining schedule for new employees in class of
2011 on track: We believe given the macro uncertainty,
management of Indian IT companies will have to think
hard about the large number of job offers made for 2011.
Since Infosys management has guided for a steep
-300bps margin decline, any unwanted employee
additions would be a further drag on margins. Hence,
the decision on deferring the joining date for its class of
2011 will be the single biggest indicator of an impending
slowdown, in our view. So far, our channel checks
indicate that none of the companies have deferred any
joining dates.
Increasing focus on employee mobility: We believe
Infosys is now focusing on improving employee mobility
across its delivery centers. Earlier an employee on
bench stayed at a delivery center till a new project came
along. Now, employees may be expected to move
across locations and promotions may also be linked to
employee mobility. This should help seed talent in small
town delivery centers (e.g. Bhubaneshwar and
Mangalore) and also help tighten overall utilization.
Infosys 3.0 Vision: Infosys is likely to emerge as a
more agile and nimble company in its new 3.0 avatar.
Increasing revenue/ employee and focus on employee
mobility have been the two most important focus themes
so far in our view. We believe at current rates Infosys
management is internally aspiring for revenues of
~US$20bn by 2017(CAGR 22%) with non-linear
initiatives increasing employee productivity and lowering
headcount growth needed over the same period.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Peers See Discretionary
Spending and Better Pricing
– Can Infosys be Far Behind?
Quick Comment: Our FY12e/13e EPS estimates for
Infosys are 6%-10% higher than consensus and we
believe Street EPS will be revised upwards as Infosys’
volumes and pricing trends surprise positively in the
coming quarters. We expect strong absolute and relative
returns in Infosys stock in 2HCY11. Maintain OW.
Joining schedule for new employees in class of
2011 on track: We believe given the macro uncertainty,
management of Indian IT companies will have to think
hard about the large number of job offers made for 2011.
Since Infosys management has guided for a steep
-300bps margin decline, any unwanted employee
additions would be a further drag on margins. Hence,
the decision on deferring the joining date for its class of
2011 will be the single biggest indicator of an impending
slowdown, in our view. So far, our channel checks
indicate that none of the companies have deferred any
joining dates.
Increasing focus on employee mobility: We believe
Infosys is now focusing on improving employee mobility
across its delivery centers. Earlier an employee on
bench stayed at a delivery center till a new project came
along. Now, employees may be expected to move
across locations and promotions may also be linked to
employee mobility. This should help seed talent in small
town delivery centers (e.g. Bhubaneshwar and
Mangalore) and also help tighten overall utilization.
Infosys 3.0 Vision: Infosys is likely to emerge as a
more agile and nimble company in its new 3.0 avatar.
Increasing revenue/ employee and focus on employee
mobility have been the two most important focus themes
so far in our view. We believe at current rates Infosys
management is internally aspiring for revenues of
~US$20bn by 2017(CAGR 22%) with non-linear
initiatives increasing employee productivity and lowering
headcount growth needed over the same period.
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