Infosys 1 qfy2012ru-12072011

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Infosys 1 qfy2012ru-12072011

  1. 1. 1QFY2012 Result Update | IT July 12, 2011 Infosys ACCUMULATE CMP `2,794 Performance highlights Target Price `3,200 (` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) Investment Period 12 Months Net revenue 7,485 7,250 3.2 6,198 20.8 EBITDA 2,176 2,324 (6.4) 1,962 10.9 Stock Info EBITDA margin (%) 29.1 32.1 (298)bp 31.7 (259)bp Sector IT PAT 1,722 1,818 (5.3) 1,488 15.7 Market Cap (` cr) 159,831 Source: Company, Angel Research Beta 0.8 For 1QFY2012, Infosys reported results that were almost in-line with our as well 52 Week High / Low 3,494/2661 as street expectations. The company’s performance was modest with 4.0% qoq Avg. Daily Volume 114,998 volume growth. The disappointment came from lower-than-expected 2QFY2012 guidance of 3.5–5.0% qoq growth in USD revenue, which is seasonally the Face Value (`) 5 strongest quarter. Also, revenue growth guidance for FY2012 was left unchanged BSE Sensex 18,412 at 18–20% yoy growth. We expect revenue growth (in USD terms) to record a Nifty 5,825 21% CAGR over FY2011–13E. We recommend Accumulate on the stock. Reuters Code INFY.BO Modest results: For 1QFY2012, Infosys reported revenue of US$1,671mn, Bloomberg Code INFY@IN up 4.3% qoq. In INR terms, revenue came in at `7,485cr, registering 3.2% qoq growth due to INR appreciation of 1.0% qoq against USD. The company’s EBITDA and EBIT margins declined by 298bp and 291bp qoq to 29.1% Shareholding Pattern (%) and 26.1%, respectively, due to wage hikes given in 1QFY2012, effective from Promoters 16.0 April 1, 2011. MF / Banks / Indian Fls 9.8 Outlook and valuation: Management has indicated 2QFY2012 revenue growth FII / NRIs / OCBs 36.9 to be 3.5–5.0% qoq only and has kept the annual revenue guidance unchanged Indian Public / Others 37.2 at 18–20% yoy. This implies an ask rate of 5.5% CQGR in revenue over 2HFY2012 to meet the upper end of the guidance. Also, in the midst of looming macro concerns and subdued ramp-ups in discretionary spending, the Abs. (%) 3m 1yr 3yr outperformance of 3–5% on management’s upper end of the guidance looks Sensex (4.4) 2.6 36.7 limited as it implies an ask rate of 6.5–7.5% CQGR in revenue over 2HFY2012. Being cognizant of the deteriorating macros, client-specific issues (BT account still Infosys (7.7) 3.2 78.3 being anaemic) and muted earnings guidance for FY2012, we have cut our EPS estimates for FY2012 and FY2013 to `137 and `160, respectively. Thus, we revise our one-year forward target PEx downwards to 20x from 21x and value the stock at a target price of `3,200 (earlier `3,424) and recommend Accumulate on the stock. Key financials (Consolidated) Y/E March (` cr) FY2009 FY2010 FY2011 FY2012E FY2013E Net sales 21,693 22,742 27,501 32,497 39,017 % chg 30.0 4.8 20.9 18.2 20.1 Net profit 5,990 6,219 6,823 7,819 9,136 % chg 28.6 3.8 9.7 14.6 16.8 EBITDA margin (%) 33.2 34.5 32.6 30.9 30.6 EPS (`) 104.6 109.5 119.5 136.9 159.9 P/E (x) 26.7 25.5 23.4 20.4 17.5 Srishti Anand P/BV (x) 8.3 6.6 5.9 4.8 4.0 022-39357800 Ext: 6820 RoE (%) 31.2 25.8 25.0 23.6 22.7 srishti.anand@angelbroking.com RoCE (%) 29.0 25.0 25.9 24.6 24.7 Ankita Somani EV/Sales (x) 6.9 6.3 5.2 4.3 3.4 022-39357800 Ext: 6819 EV/EBITDA (x) 20.7 18.3 16.0 13.9 11.2 ankita.somani@angelbrkoing.com Source: Company, Angel ResearchPlease refer to important disclosures at the end of this report 1
  2. 2. Infosys | 1QFY2012 Result UpdateExhibit 1: 1QFY2012 performance (IFRS, consolidated)(` cr) 1QFY12 4QFY11 % chg (qoq) 1QFY11 % chg (yoy) FY2011 FY2010 % chg (yoy)Net revenue 7,485 7,250 3.2 6,198 20.8 27,501 22,742 20.9Cost of revenue 4,353 4,012 8.5 3,441 26.5 15,054 12,078 24.6Gross profit 3,132 3,238 (3.3) 2,757 13.6 12,447 10,664 16.7SG&A expenses 956 914 4.6 795 20.3 3,483 2,812 23.9EBITDA 2,176 2,324 (6.4) 1,962 10.9 8,964 7,852 14.2Depreciation 224 222 0.9 207 8.2 862 942 (8.5)EBIT 1,952 2,102 (7.1) 1,755 11.2 8,102 6,910 17.3Other income 443 415 239 1,211 990PBT 2,395 2,517 (4.8) 1,994 20.1 9,313 7,900 17.9Income tax 673 699 (3.7) 506 33.0 2,490 1,681 48.1PAT 1,722 1,818 (5.3) 1,488 15.7 6,823 6,219 9.7EPS 30.2 31.8 (5.3) 26.1 15.7 119.5 109.5 9.2Gross margin (%) 41.8 44.7 (282)bp 44.5 (264)bp 45.3 46.9 (163)bpEBITDA margin (%) 29.1 32.1 (298)bp 31.7 (259)bp 32.6 34.5 (193)bpEBIT margin (%) 26.1 29.0 (291)bp 28.3 (224)bp 29.5 30.4 (92)bpPAT margin (%) 21.7 23.7 (200)bp 23.1 (140)bp 23.8 26.2 (244)bpSource: Company, Angel Research Exhibit 2: 1QFY2011 – Actual vs. Angel estimates (` cr) Actual Estimate % Var. Net revenue 7,485 7,435 0.7 EBITDA margin (%) 29.1 29.3 (22)bp PAT 1,722 1,689 1.9 Source: Company, Angel Research Modest show For 1QFY2012, Infosys reported revenue of US$1,671mn, up 4.3% qoq, primarily on the back of decent 4.0% qoq volume growth. The 4.0% qoq volume growth was mainly driven by 6.8% qoq growth in onsite volumes; offshore volumes grew by 2.7% qoq. Pricing remained stable during the quarter. The cross-currency movement benefited USD revenue by 1.2% qoq. Revenue in constant currency (CC) terms came in at US$1,651mn, up 3.1% qoq. In INR terms, revenue came in at `7,485cr, registering 3.2% qoq growth – lower growth as against USD revenue due to INR appreciation of 1.0% qoq against the USD in 1QFY2012. During the quarter, the company signed three large deals and three transformational deals.July 12, 2011 2
  3. 3. Infosys | 1QFY2012 Result Update Exhibit 3: Trend in volume growth (Effort wise) 15 12 11.4 9 7.9 7.6 7.2 6.8 7.0 5.5 6 (%) 3.5 4.0 3.1 3 2.3 2.7 0 (0.2) (3) (1.4) (2.0) 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Offshore Onsite Total volume growth Source: Company, Angel Research Exhibit 4: Trend in volume and revenue growth (qoq) 10 9.3 7.6 8 6 7.2 4.7 (%) 4 6.0 4.0 3.1 2 3.1 0.8 0 (1.4) 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 (2) Revenue growth (constant currency) Volume growth Source: Company, Angel Research Decent growth across industries (ex. telecom) and services Infosys reclassified its service offerings in three categories – 1) business operations, 2) consulting and system integration and 3) products, platforms and solutions. Business operations (contributed 60% to revenue) grew by 4.3% qoq, majorly led by 7.2% qoq growth in testing services. Application development, application maintenance and IMS posted 5.0%, 5.7% and 0.9% qoq growth in revenue, respectively. Revenue from BPO stood almost flat qoq, with merely 0.6% qoq growth. The company added eight new clients in the BPO space. Consulting and system integration (contributed 31.7% to revenue) grew by 4.0% qoq, majorly led by 7.7% qoq growth in revenue from system integration. Revenue from consulting and package implementation grew by 3.5% qoq. The major growth driver for the company was products, platforms and solutions (contributed 8.3% to revenue), which grew by 5.6% qoq, led by whopping 39.1% qoq growth in revenue from product engineering services. During the quarter, the company signed five platform deals in this segment.July 12, 2011 3
  4. 4. Infosys | 1QFY2012 Result Update Exhibit 5: Growth trend in service verticals (Reported basis) Particulars % to revenue % growth qoq % growth yoy Business operations 60.0 4.3 16.6 Application development 16.1 5.0 17.2 Application maintenance 22.3 5.7 14.8 Infrastructure management services (IMS) 5.9 0.9 5.2 Testing services 7.5 7.2 26.4 Business process management (BPO) 5.4 0.6 16.6 Others 2.8 (2.6) 32.5 Consulting and systems integration 31.7 4.0 32.7 Consulting and package implementation 25.2 3.5 24.0 Systems integration 6.3 7.7 80.3 Others 0.2 (30.5) 146.1 Products, platforms and solutions 8.3 5.6 39.9 Products 4.8 (7.3) 25.7 Product engineering services 3.2 39.1 87.5 Others 0.3 (21.8) (26.2) Source: Company, Angel Research Industry wise, growth rates were modest. The company reclassified its industry segments as: 1) financial services and insurance (FSI), 2) manufacturing, 3) retail, logistics, CPG and lifesciences (RCL) and 4) energy and utilities and communication and services (ECS). The company’s anchor FSI vertical (contributed 35.4% to revenue) grew by 3.4% qoq, led by 5.8% qoq growth in the insurance industry. Banking and financial services grew by 2.9% qoq. In CC terms, revenue from FSI grew by 2.1% qoq. Going ahead, the company is seeing traction in this vertical from risk compliance, fraud prevention and regulatory kind of work. Manufacturing (contributed 20.3% to revenue) registered 3.8% qoq growth, extending its strong growth reported in 2HFY2011. In CC terms, revenue from this vertical grew by 2.7% qoq. The company is seeing IT spending coming in the manufacturing industry segment from clients in terms of work related to harmonising processes and transformation to gain cost efficiency and simplicity. The RCL segment (contributed 22.7% to revenue) emerged as the major growth driver for the company, growing by whopping 10.7% qoq. This was majorly led by 15.8% qoq growth in retail and CPG. In CC terms, revenue from RCL grew strongly by 9.3% qoq. In this industry segment, retail is gaining good traction on account of spend related to digital commerce, digital marketing and clients targeting to go global. Currently, the company is close to signing two deals in the digital marketing space with two new deals in the pipeline. Also, CPG companies are investing a lot in package implementation kind of services. The ECS segment (contributed 21.6% to revenue) remained sluggish during the quarter, with revenue inching up by merely 0.1% qoq. In CC terms, revenue from this segment declined by 1.4% qoq. This was majorly due to a 7.1% qoq decline in revenue from communication and media, which includes telecom, due to client-specific issues (of the telecom industry) in Europe. Going ahead, the company expects its deal pipeline to pick-up for the telecom industry segmentJuly 12, 2011 4
  5. 5. Infosys | 1QFY2012 Result Update with more spend coming in from the wireless space. Infosys has just won two new deals in the telecom industry segment. Revenue from energy and utilities, however, grew by 2.5% qoq. The company is seeing traction coming in the energy and utilities industry segment from smart grid and safety kind of work. Exhibit 6: Growth trend in industry segments (Reported basis) Particulars % to revenue % growth qoq % growth yoy FSI 35.4 3.4 20.6 Banking and financial services 28.1 2.9 24.8 Insurance 7.3 5.8 6.9 Manufacturing 20.3 3.8 28.2 RCL 22.7 10.7 44.2 Retail and CPG 16.1 15.8 50.6 Transport and logistics 1.8 (10.6) 19.7 Life Sciences 3.7 4.3 35.1 Healthcare 1.1 4.3 36.5 ECS 21.6 0.1 6.1 Energy and utilities 5.7 2.5 16.0 Communication and services 10.6 (7.1) (7.8) Others 5.3 15.2 34.1 Source: Company, Angel Research In terms of geographies, revenue from North America and Rest of the World grew by 5.1% and 2.4% qoq in CC terms, respectively. However, revenue from Europe declined by 2.6% qoq in CC terms due to client-specific issues in this geography, especially in the telecom industry. Exhibit 7: Growth trend in geographies (CC basis) 16 15.6 13.3 12 9.7 6.9 7.5 8 4.7 5.1 4.2 3.7 (%) 4 2.4 1.6 2.1 0 (0.5) (0.8) (4) (2.6) 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 North America Europe Rest of the world Source: Company, Angel ResearchJuly 12, 2011 5
  6. 6. Infosys | 1QFY2012 Result Update Hiring spree continues Infosys added 9,922 gross employees in 1QFY2012, of which 4,044 were lateral additions. The net addition number, however, stood a tad lower than expectations at 2,740. Attrition, on LTM basis, declined to 15.8% in 1QFY2012 from 17.0% in 4QFY2011. However, attrition rate on a quarterly annualised basis increased to ~22% in 1QFY2012 from ~18.4% in 4QFY2011. Management plans to hire ~12,000 employees in 2QFY2012. Exhibit 8: Employee metrics 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Gross addition 8,859 14,264 11,067 8,930 9,922 Net addition 1,026 7,646 5,311 3,041 2,740 Lateral employees 2,942 4,138 5,212 3,591 4,044 Attrition – LTM basis (%) 15.8 17.1 17.5 17.0 15.8 Source: Company, Angel Research Utilisation, including trainees, inched up by 120bp qoq to 69.6% as trainees hired a couple of quarters back turned billable in this quarter. However, utilisation, excluding trainees, dipped by 30bp qoq to 74.9%. Exhibit 9: Trend in utilisation 85 81.2 80.7 78.7 80 75.2 74.9 75 (%) 74.3 70 73.0 72.6 69.6 68.4 65 60 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Including trainees Excluding trainees Source: Company, Angel Research Margins decline The company’s EBITDA and EBIT margins declined by 298bp and 291bp qoq to 29.1% and 26.1%, respectively, due to wage hikes given in 1QFY2012 (10–12% for offshore employees and 2–3% for onsite employees) effective from April 1, 2011. Also, EBIT margin got negatively impacted by 40bp qoq due to INR appreciation against USD.July 12, 2011 6
  7. 7. Infosys | 1QFY2012 Result Update Exhibit 10: Trend in EBITDA margin 200 33.3 33.3 34 167 33 100 31.7 32.1 32 0 31 (7) (BP) (100) (120) 30 (%) 29.1 (233) 29 (200) (298) 28 (300) 27 (400) 26 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Margin movement (qoq) EBITDA margin (%) Source: Company, Angel Research For FY2012, management had previously guided for a 300bp yoy decline in EBIT margin, which now has been changed to 250bp yoy. Client pyramid enhances Infosys added 26 new clients during the quarter. In 1QFY2012, seven clients from the US$10mn–20mn bracket moved to higher brackets – of which three shifted to the US$20mn–50mn bracket and four shifted to the US$50mn–100mn bracket. Also, 12 new clients came into the US$1mn–5mn bracket. However, the US$5mn–10mn bracket saw a decline of three clients. The active client base of the company increased to 628 in 1QFY2012 from 620 in 4QFY2011. Exhibit 11: Client metrics Particulars 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Top client (% of revenue) 4.9 4.7 4.6 4.7 4.5 Client addition 38 27 40 34 26 Active client 590 592 612 620 628 US$1mn–5mn 171 164 170 179 191 US$5mn–10mn 67 60 59 61 58 US$10mn–20mn 43 47 53 53 45 US$20mn–50mn 34 39 39 45 48 US$50mn–100mn 18 17 18 17 21 US$100mn–200mn 7 8 9 9 9 US$200mn plus 1 2 2 2 2 Source: Company, Angel Research Guidance The FY2012 USD revenue growth guidance was left unchanged at 18–20% yoy to US$7.13bn–7.25bn. For 2QFY2012, Infosys has guided for 3.5–5.0% qoq growth in USD revenue to US$1.730bn–1.755bn, which is lower than our expectations and indicates that management is banking on back-ended growth (in 2HFY2012), which makes us cautious as the second half of every fiscal year is typically slow. EPS guidance for FY2012 increased to US$2.88–2.92, 10.0–11.5% yoy growth vs. the previous guidance of 8–10% yoy growth.July 12, 2011 7
  8. 8. Infosys | 1QFY2012 Result Update On the margin front, Infosys expects a 250bp yoy decline in its margin because of 1) 80bp negative impact due to INR appreciation against USD, assuming average rate of 44.50 for FY2012, 2) 100bp negative impact due to utilisation coming off on account of hiring to maintain bench so as to map into any uptick in demand coming in and 3) 70bp negative impact due to higher employee costs. Exhibit 12: 2QFY2012 and FY2012 guidance FY2012-Previous FY2012-Revised Guidance (IFRS) 2QFY2012 (As on 4QFY2011) (As on 1QFY2012) Revenue (` cr) 7,699-7,810 31,727-32,270 31,777-32,311 EPS (`) 29.64-30.15 126.05-128.21 128.20-130.08 Revenue (US$bn) 1.730-1.755 7.13-7.25 7.13-7.25 Basic EPADS (US$) 0.67-0.68 2.83-2.88 2.88-2.92 Source: Company, Angel Research Outlook and valuation Management has indicated 2QFY2012 revenue growth to be 3.5–5.0% qoq only and has kept the annual revenue guidance unchanged at 18–20% yoy. This implies an ask rate of 5.5% CQGR in revenue over 2HFY2012 to meet the upper end of the guidance. Also in the midst of looming macro concerns and subdued ramp-ups in discretionary spending, the outperformance of 3–5% on management’s upper end of the guidance looks limited as it implies an ask rate of 6.5–7.5% CQGR in revenue over 2HFY2012. Typically, 2H is sluggish and risks like 1) unanticipated higher days of closure in 3Q for the holiday season and 2) probability of clients delaying the outlay due to kick off in next-year budgeting cycles prevail. Thus, the deviation from a normal year (i.e. front-ended growth) to back-ended growth is worrisome and restricts the probable outperformance of management’s guidance. Thus, we revise down our USD revenue CAGR estimate over FY2011–13E to 21% from 23.5%. Margin headwinds such as 1) weak utilisation (yoy) due to strong fresher hiring and 2) limited volume growth resulting in non-absorption of the full impact of annual wage hikes and 3) INR appreciation are expected to pull down the company’s EBITDA margin to 30.9% and 30.6% in FY2012E and FY2013E, respectively, from 32.6% in FY2011. Thus, we expect Infosys to report revenue (INR terms), EBITDA and PAT CAGR of 19.1%, 15.3% and 15.7%, respectively. Being cognizant of the deteriorating macros, client-specific issues (BT account still being anaemic) and muted earnings guidance for FY2012, we have cut our EPS estimates for FY2012 and FY2013 to `137 and `160, respectively. Thus, we revise our one-year forward target PEx downwards to 20x from 21x and value the company at a target price of `3,200 (earlier `3,424) and recommend Accumulate on the stock.July 12, 2011 8
  9. 9. Infosys | 1QFY2012 Result Update Exhibit 13: Key assumptions Parameters FY2012 FY2013 Volume growth (%) 16.7 23.3 Revenue growth – USD terms (%) 20.9 21.3 USD–INR rate 44.5 44.0 Revenue growth – INR terms (%) 18.2 20.1 EBITDA margin (%) 30.9 30.6 Tax rate (%) 28.0 28.0 EPS growth (%) 14.6 16.8 Source: Company, Angel Research Exhibit 14: Change in estimates FY2012 FY2013 Parameter Earlier Revised Variation Earlier Revised Variation (` cr) estimates estimates (%) estimates estimates (%) Net revenue 32,999 32,497 (1.5) 40,203 39,017 (2.9) EBITDA 10,255 10,028 (2.2) 12,104 11,924 (1.5) Other income 1,625 1,800 10.7 1,848 1,924 4.1 PBT 10,899 10,863 (0.3) 12,757 12,688 (0.5) Tax 2,943 3,044 3.4 3,444 3,553 3.1 PAT 7,956 7,819 (1.7) 9,313 9,136 (1.9) Source: Company, Angel Research Exhibit 15: One-year forward PE (x) 4,700 4,100 3,500 2,900 (`) 2,300 1,700 1,100 500 Oct-09 Sep-07 Feb-08 May-09 Dec-08 Jun-11 Jan-11 Apr-07 Jul-08 Mar-10 Aug-10 Price 26x 22x 18x 14x 10x Source: Company, Angel ResearchJuly 12, 2011 9
  10. 10. Infosys | 1QFY2012 Result UpdateExhibit 16: Recommendation summary Company Reco CMP Tgt. price Upside FY2013E FY2013E FY2011-13E FY2013E FY2013E (`) (`) (%) P/BV (x) P/E (x) EPS CAGR (%) RoCE (%) RoE (%) 3iInfotech Neutral 44 - - 0.6 3.7 (4.3) 12.0 15.1 Educomp Buy 385 522 35.5 1.3 7.4 17.7 16.4 17.0 Everonn Accumulate 524 602 14.9 2.5 12.4 27.7 15.5 16.7 HCL Tech Buy 492 591 20.2 3.1 11.6 30.8 18.9 26.9 Infosys Accumulate 2,794 3,200 14.5 4.0 17.5 15.7 24.7 22.7 Infotech Enterprises Neutral 139 - - 1.1 8.7 13.0 15.0 13.2 KPIT Cummins Buy 179 208 16.2 1.7 10.6 21.9 21.8 17.7 Mphasis Buy 431 499 15.8 1.6 9.7 9.2 16.8 16.8 NIIT Buy 54 68 26.3 1.3 7.8 10.9 12.4 16.6 TCS Buy 1,147 1,337 16.6 5.9 18.9 17.1 29.3 31.4 Tech Mahindra Accumulate 742 790 6.4 2.1 13.2 6.8 14.9 15.6 Wipro Buy 415 483 16.5 3.1 14.6 14.5 16.3 21.5 Source: Company, Angel ResearchJuly 12, 2011 10
  11. 11. Infosys | 1QFY2012 Result Update Profit and loss statement (IFRS, consolidated) Y/E March (` cr) FY2009 FY2010 FY2011 FY2012E FY2013E Net sales 21,693 22,742 27,501 32,497 39,017 Cost of revenue 11,765 12,078 15,054 18,578 22,638 Gross profit 9,928 10,664 12,447 13,919 16,379 % of net sales 45.8 46.9 45.3 42.8 42.0 Selling and marketing expenses 1,104 1,184 1,512 1,742 2,115 % of net sales 5.1 5.2 5.5 5.4 5.4 General and admin expenses 1,629 1,628 1,971 2,148 2,339 % of net sales 7.5 7.2 7.2 6.6 6.0 EBITDA 7,195 7,852 8,964 10,028 11,924 % of net sales 33.2 34.5 32.6 30.9 30.6 Dep. and amortization 761 942 862 965 1,160 % of net sales 3.5 4.1 3.1 3.0 3.0 EBIT 6,434 6,910 8,102 9,063 10,764 % of net sales 29.7 30.4 29.5 27.9 27.6 Other income 475 990 1,211 1,800 1,924 Profit before tax 6,909 7,900 9,313 10,863 12,688 Provision for tax 919 1,681 2,490 3,044 3,553 % of PBT 13.3 21.3 26.7 28.0 28.0 PAT 5,990 6,219 6,823 7,819 9,136 Minority interest - - - - - Adj. PAT 5,990 6,219 6,823 7,819 9,136 Fully diluted EPS (`) 104.6 109.5 119.5 136.9 159.9July 12, 2011 11
  12. 12. Infosys | 1QFY2012 Result Update Balance sheet (IFRS, consolidated) Y/E March (` cr) FY2009 FY2010 FY2011 FY2012E FY2013E Current assets Cash and cash equivalents 10,993 12,111 16,666 20,644 25,737 Available for sale financial assets - 2,556 21 30 30 Investment in certificates of deposit - 1,190 123 25 25 Trade receivables 3,672 3,494 4,653 5,520 6,628 Unbilled revenue 750 841 1,243 1,425 1,710 Derivative financial instruments - 95 66 85 100 Prepayments and other current assets 411 641 917 1,137 1,366 Total current assets 15,826 20,928 23,689 28,866 35,595 Non-current assets Property, plant and equipment 4,665 4,439 4,844 5,079 5,119 Goodwill 692 829 825 830 835 Intangible assets 35 56 48 60 60 Available for sale financial assets - - 23 23 23 Deferred income tax assets 447 356 378 400 400 Income tax assets 274 667 993 1,000 1,000 Other non-current assets 262 347 463 613 495 Total non-current assets 6,375 6,694 7,574 8,005 7,932 Total assets 22,201 27,622 31,263 36,871 43,527 Current liabilities Trade payables 27 10 44 20 20 Derivative financial instruments 114 - - - - Current income tax liabilities 581 724 817 820 737 Client deposits 5 8 22 25 30 Unearned revenue 331 531 518 528 540 Employee benefit obligations 104 131 140 140 140 Provisions 92 82 88 90 80 Other liabilities 1,471 1,707 2,012 1,800 1,500 Total current liabilities 2,725 3,193 3,641 3,423 3,047 Non-current liabilities Deferred income tax liabilities 39 124 - - - Employee benefit obligations 187 171 259 260 260 Other liabilities 56 61 60 61 60 Total non-current liabilities 282 356 319 321 320 Total liabilities 3,007 3,549 3,960 3,744 3,367 Equity Share capital 286 286 286 286 286 Share premium 2,944 3,047 3,082 3,100 3,100 Retained earnings 15,972 20,668 23,826 29,641 36,773 Other components of equity (8) 72 109 100 - Total equity 19,194 24,073 27,303 33,127 40,159 Total liabilities and equity 22,201 27,622 31,263 36,871 43,527July 12, 2011 12
  13. 13. Infosys | 1QFY2012 Result Update Cash flow statement (IFRS, consolidated) Y/E March (` cr) FY2009 FY2010 FY2011 FY2012E FY2013E Pre-tax profit from operations 6,434 6,910 8,102 9,063 10,764 Depreciation 761 942 862 965 1,160 Pre tax cash from operations 7,195 7,852 8,964 10,028 11,924 Other income/prior period ad 475 990 1,211 1,800 1,924 Net cash from operations 7,670 8,842 10,175 11,828 13,848 Tax 919 1,681 2,490 3,044 3,553 Cash profits 6,751 7,161 7,685 8,784 10,296 (Inc)/dec in current assets (664) (238) (1,808) (1,288) (1,637) (Inc)/dec in current liabilities 547 468 448 (218) (376) (Inc)/dec in net trade WC (117) 230 (1,360) (1,506) (2,013) Cashflow from operating activities 6,635 7,391 6,325 7,278 8,283 (Inc)/dec in fixed assets (1,372) (716) (1,267) (1,200) (1,200) (Inc)/dec in investments 71 (3,746) 3,602 89 - (inc)/dec in sale of financial assets - - (23) - - (Inc)/dec in deferred tax assets (213) (302) (348) (29) - (Inc)/dec in other non-current liab. 115 74 (37) 2 (1) (Inc)/dec in other non-current ass. (77) (243) (104) (167) 113 Cashflow from investing activities (1,475) (4,933) 1,823 (1,305) (1,088) Inc/(dec) in debt - - - - - Inc/(dec) in equity/premium (758) 333 (1,256) 9 (100) Dividends 1,574 1,673 2,337 2,004 2,004 Cashflow from financing activities (2,331) (1,340) (3,593) (1,995) (2,104) Cash generated/(utilised) 2,829 1,118 4,555 3,979 5,092 Cash at start of the year 8,164 10,993 12,111 16,666 20,644 Cash at end of the year 10,993 12,111 16,666 20,644 25,736July 12, 2011 13
  14. 14. Infosys | 1QFY2012 Result Update Key ratios Y/E March FY2009 FY2010 FY2011 FY2012E FY2013E Valuation ratio (x) P/E 26.7 25.5 23.4 20.4 17.5 P/CEPS 23.7 22.3 20.8 18.2 15.5 P/BVPS 8.3 6.6 5.9 4.8 4.0 Dividend yield (%) 0.8 0.9 1.2 1.1 1.1 EV/Sales 6.9 6.3 5.2 4.3 3.4 EV/EBITDA 20.7 18.3 16.0 13.9 11.2 EV/Total assets 6.7 5.2 4.6 3.8 3.1 Per share data (`) EPS 105 109 119 137 160 Cash EPS 118 125 134 154 180 Dividend 23.5 25.0 34.9 29.9 29.9 Book value 336 421 477 579 702 DuPont analysis Tax retention ratio (PAT/PBT) 0.9 0.8 0.7 0.7 0.7 Cost of debt (PBT/EBIT) 1.1 1.1 1.1 1.2 1.2 EBIT margin (EBIT/sales) 0.3 0.3 0.3 0.3 0.3 Asset turnover ratio (sales/assets) 1.0 0.8 0.9 0.9 0.9 Leverage ratio (assets/equity) 1.2 1.1 1.1 1.1 1.1 Operating ROE 31.2 25.8 25.0 23.6 22.7 Return ratios (%) RoCE (pre-tax) 29.0 25.0 25.9 24.6 24.7 Angel RoIC 57.4 58.7 56.1 56.0 60.7 RoE 31.2 25.8 25.0 23.6 22.7 Turnover ratios (x) Asset turnover (fixed assets) 3.4 3.4 3.6 4.1 4.9 Receivables days 74 70 78 78 78July 12, 2011 14
  15. 15. Infosys | 1QFY2012 Result Update Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stocks price movement, outstanding positions and trading volume, as opposed to focusing on a companys fundamentals and, as such, may not match with a report on a companys fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement Infosys 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)July 12, 2011 15

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