Infosys :: Management Meet Note , ICICI Securities, link

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New and renew!
We attended Infosys’ analyst day in Pune, which highlighted the themes
resonating within the company and across its stakeholders. Infosys is
undergoing another strategic transformation and is emphasising broadly
on two themes: 1) renewing the core business and 2) innovating in new
business along with the core foundations of education and
connectedness, thereby harmonising employees across renew and new
with no left out feeling. Acknowledging that this transformation is
demanding and could stretch, the management is confident of execution
and believes such a company could sustain 15-18% revenue growth and
25-28% EBIT margins.
Focusing on select core, new services for revenue growth momentum…
Infosys emphasised the massive embrace of design thinking – new – in
renewing existing offerings such as consulting services, product
engineering and Finacle. The company noted that next generation PLM,
integration of physical with digital, is creating opportunities with Infosys
starting three to six such engagements in the last four months. Infy is also
busy revitalising the existing Finacle installed base under its new head
Michael Reh by focusing on digital, mobility and analytics services.
Building scale in new services…
Infosys is hiring aggressively in new technologies with the headcount up
59% in data analytics, 31% in infrastructure services, 22% in security,
13% in cloud and 4% in digital in the last two quarters. Further, the
company is cascading the transformation message by actively pursuing
design thinking and innovation services training for senior & junior
technical & sales employees and client workshops. Currently, ~8300 entry
level and 160+ senior employees have been trained on design thinking
while more could follow during the scheduled December 9-15 design
week when Stanford faculty visits Mysuru. Interestingly, 70% of US based
consultants have been trained on design thinking while 1000 people have
been trained on AI/machine learning with 500 being added every quarter.
Strengthening sales engine…
Infosys is adding more feet on the ground and has added 207 (104 US, 42
Europe, 61 RoW) sales heads in the last two quarters. It is also improving
sales effectiveness through training and competency through assessment
framework. Further, to increase retention the company has benchmarked
fixed salary to peers and has raised bonus payouts and promotions (>200
in H2FY15). Noticeably, the company has optimised the performance
metric depending upon the hierarchy (earlier similar across bands) and
has moved to absolute performance rating vs. bell curve earlier. Finally,
the company is innovating sales engine for existing clients through
automation as well as by creating virtual marketplace. Myworld portal
helps employees, especially on the bench, to place snippets of their work
on newer technologies, which acts as ideation for clients.
Raising target price on EPS, multiple upgrade; maintain BUY
We estimate Infosys will report rupee revenue, earnings CAGR of 9%,
14% over FY14-16E (average 25.6% EBIT margins in FY15-16E), vs. 18%,
12% reported in FY09-14 (average 28.1%), respectively. Though earnings
trajectory could improve over time, incoming CEO continues to impress
with his strategic direction. Modest earnings upgrade led by increase in
our rupee assumption coupled with multiple revision (20x vs. 19x earlier)
lead to a revised target price of | 2,400 vs. | 2,250 earlier. Maintain BUY.

LINK
http://content.icicidirect.com/mailimages/IDirect_Infosys_CoUpdate_Dec14.pdf