Infosys 3QFY15 results were above our expectations on the EBIT and PAT front. :: HDFC Securities

Please Share::

Infosys' 3QFY15 results were above our expectations on the EBIT and PAT front. However, USD revenues were marginally below our expectation. Renewed aggression under the new CEO has led to solid volume growth of 4.2% QoQ, the highest over the trailing thirteen quarters. We believe that Infosys appears to be more receptive on the pricing front in a bid to regain market share. Offshore pricing remained on the downtrend and dropped by 4.1% QoQ for 3QFY15 (~2.4% drop in constant currency).

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

��

-->
Volume revival raises optimism
Infosys’ 3QFY15 results were above our expectations
on the EBIT and PAT front. However, USD revenues
were marginally below our expectation.
Renewed aggression under the new CEO has led to
solid volume growth of 4.2% QoQ, the highest over
the trailing thirteen quarters. We believe that
Infosys appears to be more receptive on the pricing
front in a bid to regain market share. Offshore
pricing remained on the downtrend and dropped by
4.1% QoQ for 3QFY15 (~2.4% drop in constant
currency). The blend pricing drop for 3QFY15 has
been the steepest over the past nine quarters. We
see continued pricing pressure in commoditized
services (ADM, IMS, BPO). However, we believe the
use of automation and a gradual improvement in
service mix could arrest a steep decline. Strong
revival in volume growth momentum indicates that
Infosys could narrow the growth differential with
peers in FY16. Valuations remain favorable (15.1x
FY17 EPS) and INFY currently trades at a 13%
discount to TCS. Retain BUY with a revised TP of Rs
2,325/sh (17x FY17E EPS).
 3QFY15 Highlights : Revenues at USD 2,218mn,
were up 0.8% QoQ (2.6% in constant currency) and
below our estimates (USD 2,226mn). Volume growth
came in at 4.2% QoQ (onsite up 3.7%, offshore up
4.4% QoQ). EBIDTA margin stood at 28.7%, up 40bps
QoQ and above our estimates (28.3%). Effort mix shift
towards offshore and an improvement in utilization
aided margins for the quarter. PAT at Rs 32.5bn was
2.5% above our estimates driven by the margin beat.
 Valuation and view : We trim our USD revenue
growth assumptions marginally to 7.2/12.6% for
FY15/FY16E (vs. 8.1/13% earlier) on the back of cross
currency headwinds and pricing pressure. Strong
traction in SMAC technologies, IMS, Consulting and
Products could be the growth drivers in FY16E. A
moderating attrition trend as seen in 3QFY15 and
steady improvement in other operating levers
(utilization rates, offshore shift) are further positives.
Currency reset to lower levels and 3Q margin beat
enables us to upgrade our EBIDTA margin assumptions
to 28.3/28.1% for FY16/FY17E (vs. 27.7/27.4% earlier).
We upgrade our EPS estimate by 3/2.6% for
FY16/FY17E. Our TP is upgraded by 9% to Rs 2,325/sh
led by EPS and P/E upgrades (17x FY17 EPS vs. 16x
earlier). Retain BUY