Infosys - Two pronged strategy for revival : HDFC Securities

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
Two pronged strategy for revival
We attended the Infosys analyst meet held on 4-
Dec-14 at Pune. Key takes are as follows:
 Dr. Vishal Sikka has guided for a two pronged
approach to revive growth at Infosys. Within the
‘Renew Business’ approach, which focuses on
traditional service lines (IMS, BPO, Testing), the
company intends to increase efficiency of delivery by
focusing on Automation and Artificial Intelligence to
drive productivity. In the ‘New Business’, it intends to
enhance offerings in Design Thinking, build platforms
for Big Data & Analytics and partner with start-ups. Dr.
Sikka intends to leverage Infosys’ strong training
infrastructure in Mysore to re-skill employees.
Management guided that ~8,300 trainees have
already been given an introductory training session in
Design Thinking and ~250 senior executives have
undergone an in-depth training in this service. The
new CEO guided that focus would be to improve
revenue per employee to boost growth over the long
term. Management also intends to strengthen Finacle
and the Platforms business unit (EdgeVerve).
 Infosys also intends to focus on improving client
mining; and hence, has increased hiring in Sales and
Marketing. Company has increased its Sales
headcount by ~207 employees over the past two
quarters (~104 in Americas, 42 in Europe, ~61 in
ROW). It has also started a sales effectiveness
programme which has covered over 30% of the sales
workforce. Further, Infosys has beefed up the delivery
engine with strong headcount increase in core areas
(headcount in Big Data, IMS, Cloud were up 59/
31/14% over the past two quarters).
 View : Infosys has rallied 13% over the past three
months, driven by positive sentiment owing to the
appointment of Dr. Sikka as CEO as well as steady
performance in 2QFY15. The stock has been re-rated
and currently trades at 17.6 x on a rolling one year
forward earnings (vs. 13.8x in June 2014 which was
prior to the appointment of the new CEO). Infosys’
valuation discount to TCS has narrowed to 16% (vs.
25% three months ago). We model USD revenue
growth assumptions of 8.1/13% for FY15/FY16E. We
believe that FY15 could be a year of transition for the
company. We expect growth to accelerate in FY16,
and see scope for Infosys to narrow the growth
differential with peers. Cash and equivalents stand at
Rs 336bn (Rs 293/sh) as of 2QFY15, which is ~14% of
its Mcap. Better clarity on capital allocation could be
an additional trigger for the stock. We retain our TP at
Rs 2,132/sh (16x FY17E EPS). Maintain BUY.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010168