Showing posts with label wells fargo. Show all posts
Showing posts with label wells fargo. Show all posts
09 January 2013
07 January 2013
16 April 2011
Infosys: FY12 Operating Margin/EPS Guide Disappoints, Ests. Lower :: Wells Fargo
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Infosys Technologies Ltd.
INFY: FY12 Operating Margin/EPS Guide Disappoints, Ests. Lowere
We Are Increasingly Concerned About Under-investment In Growth
• Summary: FQ4 Touch Light; Initial FY12 Guided Well-below Street
on Weaker Than Expected Operating Margin; Concerns Over Ability
to Grow Top-line Intensifying; Our Estimates Lowered. FQ4
($1.602bn/$0.70) touch light compared to Our ($1.626bn/$0.71) and Street
($1.633bn/$0.70) estimates, but within guidance ($1.601-1.617bn/$0.69-0.70).
Guidance was offered below expectation for revenue (slightly), operating margin
(notably) and for EPS (notably). We are lowering our FY12 EPS estimate to
$2.86 from $3.07, and initiating a FY13 EPS estimate of $3.32. While not
concerned about INFY's ability to manage/optimize the supply side of the model
(i.e. people and utilization), we are increasingly concerned that INFY is losing
share to providers such as Accenture (ACN) and Cognizant (CTSH) that have had
a consistent, and more aggressive, approach to demand generation. Also, visa
availability concerns rising again as Senator Grassley has asked for an
investigation of INFY's visa practices in wake of a late February employee
lawsuit. We are lowering our Valuation Range to $58-62 (21-22x CY11 EPS)
from $68-72 reflecting lower estimates and concerns about an out-of-sync
business model. Given the sharp share decline today, we are maintaining our
Market Perform investment rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infosys Technologies Ltd.
INFY: FY12 Operating Margin/EPS Guide Disappoints, Ests. Lowere
We Are Increasingly Concerned About Under-investment In Growth
• Summary: FQ4 Touch Light; Initial FY12 Guided Well-below Street
on Weaker Than Expected Operating Margin; Concerns Over Ability
to Grow Top-line Intensifying; Our Estimates Lowered. FQ4
($1.602bn/$0.70) touch light compared to Our ($1.626bn/$0.71) and Street
($1.633bn/$0.70) estimates, but within guidance ($1.601-1.617bn/$0.69-0.70).
Guidance was offered below expectation for revenue (slightly), operating margin
(notably) and for EPS (notably). We are lowering our FY12 EPS estimate to
$2.86 from $3.07, and initiating a FY13 EPS estimate of $3.32. While not
concerned about INFY's ability to manage/optimize the supply side of the model
(i.e. people and utilization), we are increasingly concerned that INFY is losing
share to providers such as Accenture (ACN) and Cognizant (CTSH) that have had
a consistent, and more aggressive, approach to demand generation. Also, visa
availability concerns rising again as Senator Grassley has asked for an
investigation of INFY's visa practices in wake of a late February employee
lawsuit. We are lowering our Valuation Range to $58-62 (21-22x CY11 EPS)
from $68-72 reflecting lower estimates and concerns about an out-of-sync
business model. Given the sharp share decline today, we are maintaining our
Market Perform investment rating.
24 February 2011
Wells Fargo: India Budget Expectations - Potential STPI Extension- A Modest Positive For IT/BPO Providers
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India Budget Expectations
Potential STPI Extension A Modest Positive For IT/BPO Providers
But Likely Neutral If No Extension--Guidance/Ests Assume None
• Summary: Potential For STPI Extension Is The Main Focus For
IT/BPO Services For Monday's (2/28) Indian Budget Release. The
Indian government is expected to announce its budget proposal for FY2012
(begins April 1, 2011) on Monday, February 28. Based on our checks, the key issue
for the IT/BPO services sector is the potential that the STPI tax benefit is
extended one year beyond the current March 31 expiration date. It remains
unclear whether the benefit will again be extended, but we note that offshore
providers have assumed a higher tax rate from the anticipated expiration in their
forward outlooks/guidance. BOTTOM-LINE: In our view, an extension of the
STPI would represent some upside potential for most offshore IT/BPO providers,
but failure to extend the STPI would be neutral, not negative, since expiration has
already been assumed in guidance and our/Street estimates. Assuming that STPI
extension would keep CY2011 tax rates flat at CY2010 rates for each firm, we
estimate that Infosys (INFY) would see the smallest EPS benefit (see Exhibit 1) at
only 2% of our CY2011 EPS estimate. We estimate that Cognizant (CTSH) and
Syntel (SYNT) would benefit most with EPS increasing 11% and 8%, respectively.
• STPI And SEZ Background. The Software Parks of India (STPI) scheme by
the government includes tax benefits for export profits from designated STPI
sites. Export profits from these locations are exempted from taxation for a period
of ten years, starting when exports from the STPI site begin. We understand that
INFY and G were among the earliest users of STPI and so have the most STPI
facilities older than 10 years. The STPI tax benefit was initially set to expire March
31, 2009 but was extended twice for one year. As a result of this looming
expiration, large providers have been expanding their operations in newer taxfavored Special Economic Zones (SEZs), which provides tax incentives for 15
years, including a 100% tax exemption on exports from the zones for 5 years and
a 50% tax exemption for the next 5 years. We note that firms have been moving
the vast majority of incremental work into these new SEZs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Budget Expectations
Potential STPI Extension A Modest Positive For IT/BPO Providers
But Likely Neutral If No Extension--Guidance/Ests Assume None
• Summary: Potential For STPI Extension Is The Main Focus For
IT/BPO Services For Monday's (2/28) Indian Budget Release. The
Indian government is expected to announce its budget proposal for FY2012
(begins April 1, 2011) on Monday, February 28. Based on our checks, the key issue
for the IT/BPO services sector is the potential that the STPI tax benefit is
extended one year beyond the current March 31 expiration date. It remains
unclear whether the benefit will again be extended, but we note that offshore
providers have assumed a higher tax rate from the anticipated expiration in their
forward outlooks/guidance. BOTTOM-LINE: In our view, an extension of the
STPI would represent some upside potential for most offshore IT/BPO providers,
but failure to extend the STPI would be neutral, not negative, since expiration has
already been assumed in guidance and our/Street estimates. Assuming that STPI
extension would keep CY2011 tax rates flat at CY2010 rates for each firm, we
estimate that Infosys (INFY) would see the smallest EPS benefit (see Exhibit 1) at
only 2% of our CY2011 EPS estimate. We estimate that Cognizant (CTSH) and
Syntel (SYNT) would benefit most with EPS increasing 11% and 8%, respectively.
• STPI And SEZ Background. The Software Parks of India (STPI) scheme by
the government includes tax benefits for export profits from designated STPI
sites. Export profits from these locations are exempted from taxation for a period
of ten years, starting when exports from the STPI site begin. We understand that
INFY and G were among the earliest users of STPI and so have the most STPI
facilities older than 10 years. The STPI tax benefit was initially set to expire March
31, 2009 but was extended twice for one year. As a result of this looming
expiration, large providers have been expanding their operations in newer taxfavored Special Economic Zones (SEZs), which provides tax incentives for 15
years, including a 100% tax exemption on exports from the zones for 5 years and
a 50% tax exemption for the next 5 years. We note that firms have been moving
the vast majority of incremental work into these new SEZs.
04 November 2010
INFY: Notes From Lunch With CFO Bala; Tone Positive: Wells Fargo
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Infosys Technologies Ltd.
INFY: Notes From Lunch With CFO Bala; Analyst Meeting Tuesday
Tone Positive, But Client Spend Visibility Remains Modest
• Summary: Infosys (INFY) CFO Offered Positive Commentary/Tone,
But Nothing Incremental. Analyst Meeting Tuesday in NYC. Shortterm
visibility indicated as high, and unlike Cognizant (CTSH) not seeing an end
to "pent up" demand. Intermediate-term less so as clients keep project
durations short. Long-term sees positioning, shift to more offshore, expanding
service offering and significant penetration potential offering comfort to
continued strong growth outlook. No financial update to be offered at analyst
meeting. Reiterate Market Perform, only hold back is valuation, although bias is
up.
23 October 2010
Offshore IT/BPO: Positive Read From No. 1 TCS's Quarter:: Wells Fargo
Visit http://indiaer.blogspot.com/ for complete details Offshore IT/BPO: Positive Read From No. 1 TCS's
Quarter
Rapid Growth, High Operating Margin, Positive Tone--Foreign
Exchange Becoming Issue
Preview
• Summary. Largest Offshore IT/BPO Provider Tata Consultancy
Services (TCS) Reported Very Strong CQ3 And Offered A Rather
Positive Tone. Reinforces Our Positive View Toward CTSH. TCS
reported revenue growth of 10.4% qtr/qtr and 29% yr/yr (U.S. GAAP/U.S. dollar
terms), which press reports indicated was above expectations for this Indiatraded
company. Volume growth was up a very strong 11.2%. Double-digit
sequential growth was across both verticals and geographies. Strength was not
viewed as release of pent-up demand, but rather steady recovery and increased
use of offshore capabilities. TCS won eight large deals as the legacy offshore
providers continue to prove they can participate with the more global providers.
High utilization, revenue-driven SG&A leverage, and favorable foreign exchange
(FX) led to record operating margin of 28.0%. TCS believes more margin upside
is possible, but noted the sharply unfavorable turn in FX since the beginning of
September will weigh on CQ4. Given improved demand, TCS sees pricing
improving in CY2011. Gross and net hiring was very strong, more than offsetting
sticky high employee attrition of 13.1% (trailing 12 months, IT services only; our
estimate is 19.3% for the quarter annualized). While not providing specific
guidance, management was as positive as we have heard it in some time on the
outlook.
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