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1. Investor’s Eye
July 14, 2017
Index
Stock Update - Infosys
SAI PROFICIENT INVESTMENT ADVISORY

2. July 14, 2017 2
Stock Update
Good performance, sustainability still remain a challenge
Key points
 Good Quarter: Infosys reported higher-than-
expected earnings for Q1FY18 after posting
lackluster performances in the past consecutive
quarters. For Q1FY18, constant currency (CC)
revenue up by 2.7% on a sequential basis
and 3.2% on reported basis to $2651 mn,
led by volume growth of 1.7% coupled with
improvement in realizations (1.8%QoQ), the
topline growth was largely attributed to an
uptick in BFSI, Retail and Energy verticals. EBIT
margin contracted by 53BPS on a sequential
basis at 24.1% (above our estimates), owing to
rupee appreciation (80BPS), increase in sub-
contracting expenses (up 6% QoQ) and higher
pay variables, partially offset by operational
efficiencies (improved utilization, positive
impact of 90BPS), improvement in realisations
and cross-currency tailwinds (20BPS). The net
profit for the quarter declined by 3.3% QoQ to
Rs3,483 crore.
 Retained guidance, hopes pinned on H2FY18
growth picks up in BFSI: Infosys has retained its
revenues guidance of 6.5-8.5% on CC basis for
FY2018. However, management commentary
suggests that growth is likely to be back ended
and is largely dependent on expectations of a
pick up in the growth of BFSI (its largest vertical)
in H2FY18. We however, see a downside risk
to the execution of the upper end of current
guidance. This is based on the fact that H2 is
seasonally weaker for IT majors and also the
fact that the management commentary of
Infosys (that expects a pick up in the growth) is
starkly different as compared to TCS (continues
to witness stress) in the BFSI vertical. This is
clearly suggestive of an absence of secular
demand revival in the BFSI sector. Although
there is a possibility of a revival in the BFSI
growth, given a rising interest rateenvironment
in US and Europe/UK withstanding the Brexit
verdict, large deals flows and a secular upward
movement in the sector is still looks difficult in
neartomediumterm.
 Valuation: Maintain Hold with PT of Rs1050:
We have tweaked our earnings estimates on
account of a currency reset USD/INR currency
to Rs64.5 for FY18/19E. Looking at the valuation,
the stock is down 18% odd in last one year. The
earnings multiple at 14x FY19 is already factoring
a weak growth profile over FY17-19E. This along
with the expectation of one time big dividend or
buyback (the management committed to return
Rs. 13000 crores to shareholders in FY2018 and
to pay 70% of free cash flows in the coming
years) will support any major downside in near
to medium term. However, absence of growth
trigger and increasing regulatory fear in the
US will restrict stock re-rating. We maintain our
HOLD rating on the stock with unchanged price
target of Rs1050.
Infosys
Reco: Hold | CMP: Rs972
Company details
Shareholding pattern
Price chart
Price performance
Public and
Others
11%
Foreign
55%
Promoters
13%
Institutions
21%
1200
1150
1100
1050
1000
950
900
850
800
Jul-16
Nov-16
Mar-17
Jul-17
Price target: Rs1,050
Market cap: Rs223,275 cr
52-week high/low: Rs1,195/900
NSE volume: (No of shares) 36.3 lakh
BSE code: 500209
NSE code: INFY
Sai Proficient code: INFY
Free float: (No of shares) 200.4 cr
(%) 1m 3m 6m 12m
Absolute 0.9 1.9 -1.3 -15.2
Relative to Sensex -1.6 -5.6 -16.1 -26.8

3. July 14, 2017 3
Sai Proficient Stock Update
Valuations Rs cr
Particulars FY2016 FY2017 FY2018E FY2019E
Total revenue 62,441.0 68,484.0 70,666.8 77,544.7
EBITDA margin (%) 27.4 27.2 26.5 26.8
Net profit 13,492.0 14,357.0 14,370.6 15,890.6
EPS (Rs) 59.0 62.8 62.9 69.5
P/E (x) 16.5 15.5 15.5 14.0
EV/EBITDA (x) 11.1 10.2 9.2 7.9
RoE (%) 23.2 22.0 19.8 19.9
RoCE (%) 32.1 30.5 27.5 27.5
Results Rs cr
Particulars Q1FY18 Q1FY17 Q4FY17 YoY (%) QoQ (%)
Revenues ($ mn) 2,651.0 2,501.0 2,569.0 6.0 3.2
Net sales 17,078.0 16,782.0 17,120.0 1.8 -0.2
Direct costs 10,450.0 10,281.0 10,324.0 1.6 1.2
Gross profit 6,628.0 6,501.0 6,796.0 2.0 -2.5
SG&A 2,067.0 2,054.0 2,138.0 0.6 -3.3
EBITDA 4,561.0 4,447.0 4,658.0 2.6 -2.1
Depreciation & amortisation 450.0 400.0 446.0 12.5 0.9
EBIT 4,111.0 4,047.0 4,212.0 1.6 -2.4
Other income 743.0 753.0 721.0 -1.3 3.1
PBT 4,854.0 4,800.0 4,933.0 1.1 -1.6
Tax provision 1,371.0 1,362.0 1,330.0 0.7 3.1
Reported net profit 3,483.0 3,436.0 3,603.0 1.4 -3.3
EPS (Rs) 15.2 15.0 15.8 1.4 -3.3
Margin (%) BPS BPS
EBITDA 26.7 26.5 27.2 21 -50
EBIT 24.1 24.1 24.6 -4 -53
NPM 20.4 20.5 21.0 -8 -65
Concall Highlights: Digital accounts for 23%
of revenues, seeing strong traction (1) The
management believes that there will be a rise in
spending in the BFSI segment in 2HFY18. This will be
led by higher interest rates in the US and reducing
regulatory burdens. On geographic front, the
management foresees strong growth in Europe on
the back of upgradation of new-age technologies in
various sectors. The US, on the other hand is likely
to stage moderate growth owing to protectionism
stance in the country. (2). The company is focusing
on the profitability of the consulting business and
has laid out one year revival plan for its consulting
business, out of which one quarter has completed;
(3) The company has deferred the wage hike to
Q2FY18. The wage hike will be around mid-single
digit; (4) The digital technology segment accounted
for 23% of the consolidated revenue. The company
has disclosed revenue from the new services area
(Cloud Ecosystem, Analytics, Edge, NIA, Panaya,
etc), accounted for 10% of the total consolidated
revenues. The management believes that these
new services areas are gaining traction among
its existing as well as new customers (5) The
management retained the margin guidance band
in the range of 23-25% despite rupee appreciation,
rolling out of compensation hike in Q2FY18 and
ramping up of its delivery centers in the US.
Result highlights
Decent volume growth at 1.7%
Particulars Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18
Revenues 2,256.0 2,392.0 2,407.0 2,446.0 2,501.0 2,587.0 2,551.0 2,569.0 2,651.0
QoQ $ revenue growth (%) 4.5 6.0 0.6 1.6 2.2 3.5 -1.4 0.7 3.2%
CC growth (%) 4.4 6.9 1.1 1.9 1.7 3.9 -0.3 - 2.7%
Volume 5.4 3.7 3.1 2.4 2.2 4.0 0.2 1.2 1.7%
Onsite (%) 6.6 3.5 4.4 2.7 3.3 3.1 0.6 1.9 2.0%
Offshore (%) 4.9 3.7 2.5 2.3 1.8 4.4 0.1 0.9 1.5%
Blended realisation -0.7 2.6 -2.5 -1.1 -0.5 0.2 -2.2 -0.2 1.8%
Source: Company, Sai Proficient Investment Advisory

4. Sai Proficient Stock Update
4
July 14, 2017
28%
27%
26%
25%
24%
23%
22%
21%
20%
EBIT Margins
Margins contracted on the back of higher variable pay and
rupee appreciation
Source: Company, Sai Proficient Investment Advisory
Other highlights of Q1FY2018
 The utilisation rate (ex-trainees) improved by
200BPS on sequential basis at 84.0%, highest
in last 15 years. Infosys has been consistently
maintaining the utilisation rate at more than
80% for the last nine quarters.
 The cash & cash equivalents stood at Rs39,335
crore in Q1FY2018 as against Rs38,773 crore in
the previousquarter.
 The company’s days sales outstanding (DSO)
remained at 68 days.
 Added 59 gross clients during the quarter
versus 71 clients added in Q4FY17. Total number
of active clients reached to 1,164 at the end of
Q1FY18.
 During Q1FY2018, the EdgeVerve business
delivered a strong performance with 36 wins
(Finacle 24 + Edge 12) and 38 go lives (Finacle
21 + Edge 17) from both the Finacle and Edge
suite of solutions across various market regions.
Operating metrics
Particulars Q1FY18 Q1FY17 Q4FY17 YoY (%) QoQ (%) Comments
Geographic mix (%)
North America 61.1 62.0 62.3 4.5 1.2 The management believes Europe might
report strong growth in coming quarters,
while US would report a moderate
growth. Europe grew by 3.1% QoQ on CC
basis, while US grew by 1.3% QoQ
in $ mn 1,619.8 1,550.6 1,600.5
Europe 22.4 23.0 22.1 3.2 4.6
in $ mn 593.8 575.2 567.7
India 3.6 2.7 3.2 41.3 16.1
in $ mn 95.4 67.5 82.2
Rest of world 12.9 12.3 12.4 11.2 7.4
in $ mn 342.0 307.6 318.6
Services offerings
Application development 15.4 14.4 15.3 13.4 3.9 The management has laid out a one-
year recovery plan for its consulting
business, of which one quarter has been
completed.
in $ mn 408.3 360.1 393.1
Appl maint 16.7 19.5 16.8 -9.2 2.6
in $ mn 442.7 487.7 431.6
ADM 32.1 33.9 32.1 0.4 3.2
in $ mn 851.0 847.8 824.6
BPM ( 5.0 4.9 5.1 8.2 1.2
in $ mn 132.6 122.5 131.0
Consulting & package 32.6 32.1 32.6 7.6 3.2
in $ mn 864.2 802.8 837.5
IMS 8.4 8.3 8.5 7.3 2.0
in $ mn 222.7 207.6 218.4
Product Engineering Services 4.1 3.5 4.0 24.2 5.8
in $ mn 108.7 87.5 102.8
Testing 9.3 9.1 9.0 8.3 6.6
in $ mn 246.5 227.6 231.2
Others 3.1 2.7 3.2 21.7 0.0
in US$ mln 82.2 67.5 82.2
Products and Platforms 5.4 5.5 5.5 4.1 1.3
in $ mn 143.2 137.6 141.3
Q1FY1423.6%
Q2FY1423.6%
Q3FY1425.0%
Q4FY1425.5%
Q1FY1525.1%
Q2FY1526.1%
Q3FY1526.7%
Q4FY1525.7%
Q1FY1624.0%
Q2FY1625.5%
Q3FY1624.9%
Q4FY1625.5%
Q1FY1724.1%
Q2FY1724.9%
Q3FY1725.1%
Q4FY1724.6%
Q1FY1824.1%

5. Sai Proficient Stock Update
5
July 14, 2017
Particulars Q1FY18 Q1FY17 Q4FY17 YoY (%) QoQ (%) Comments
Business operations 62.0 62.4 61.9 5.3 3.4
in $ mn 1,643.6 1,560.6 1,590.2
Business consulting 32.6 32.1 32.6 7.6 3.2
in $ mn 864.2 802.8 837.5
Products, platforms & solu-
tions
5.4 5.5 5.5 4.1 1.3
in $ mn 143.2 137.6 141.3
New Services 8.3 NA NA - - Revenues from New Services and
New Software contributed 50% of the
incremental revenue in last two years.
Digital accounted for 23% of the total
revenue.
in US$ mln 220.0 NA NA
New Software (Edge, NIA,
Panaya, Skava)
1.6 NA NA - -
in US$ mln 42.4 NA NA
Industry verticals:
Insurance 6.2 5.6 6.1 17.4 4.9 Financial services grew by 2.0% QoQ on
CC basis, compared to 1.3% in Q4FY17.
Telecom performed well during the
quarter on the back of wins around
consolidation and M&A activities.
in $ mn 164.4 140.1 156.7
Banking and financial
services
27.1 27.2 27.4 5.6 2.1
in $ mn 718.4 680.3 703.9
BFSI 33.3 32.8 33.5 7.6 2.6
in $ mn 882.8 820.3 860.6
Manufacturing 22.2 22.8 22.4 3.2 2.3
in $ mn 588.5 570.2 575.5
Retail and CPG 14.2 15.5 14.1 -2.9 3.9
in $ mn 376.4 387.7 362.2
Telecom 10.4 9.4 9.9 17.3 8.4
in $ mn 275.7 235.1 254.3
Energy & utilities 5.2 4.7 5.0 17.3 7.3
in $ mn 137.9 117.5 128.5
Transportation and logistics 1.9 1.9 2.0 6.0 -2.0
in $ mn 50.4 47.5 51.4
Life sciences and healthcare 6.6 6.8 6.6 2.9 3.2
in $ mn 175.0 170.1 169.6
Others 6.2 6.1 6.5 7.7 -1.6
in $ mn 164.4 152.6 167.0
BFSI 33.3 32.8 33.5 7.6 2.6
in $ mn 882.8 820.3 860.6
Manufacturing 22.2 22.8 22.4 3.2 2.3
in $ mn 588.5 570.2 575.5
Retail, life sciences &
transportation
22.7 24.2 22.7 -0.6 3.2
in $ mn 601.8 605.2 583.2
Energy, utilities, comm &
services
21.8 20.2 21.4 14.4 5.1
in $ mn 577.9 505.2 549.8
Client contribution (%)
Top client 3.3 3.6 3.3 -2.8 3.2 Top client revenue grew by 3.2% QoQ,
versus 7.2% in Q4FY17in $ mn 87.5 90.0 84.8
Top 10 clients 20.0 22.2 20.2 -4.5 2.2
in $ mn 530.2 555.2 518.9
Others than top 10 80.0 77.8 79.8 9.0 3.5
in $ mn 2,120.8 1,945.8 2,050.1

6. Sai Proficient Stock Update
July 14, 2017 6
Particulars Q1FY18 Q1FY17 Q4FY17 YoY (%) QoQ (%) Comments
Number of clients
1 million dollar + 606 574 598 32 8 Reduced one new client in $100 million
bucket, while six clients were added in
$25 million bucket
5 million dollar + 279 268 282 11 -3
10 million dollar + 190 180 189 10 1
25 million dollar + 97 87 91 10 6
50 million dollar + 56 52 56 4 0
75 million dollar + 31 31 31 0 0
100 million dollar + 18 17 19 1 -1
Employee metrics
Particulars Q1FY18 Q1FY17 Q4FY17
Total employees 1,98,553 1,97,050 2,00,364 The rate of attrition inched up to 21.0% in Q1FY18 ,
owing to seasonalityGross addition 8,645 13,268 9,130
Net addition -1,811 3,006 601
Attrition (Annualised%) 21.0 21.0 17.1
Revenue per FTE - Consolidated 51.9 50.9 51.4
Source: Company, Sai Proficient Investment Advisory
Utilisation (%)
Particulars Q1FY18 Q1FY17 Q4FY17 Change in
BPS YoY
Change in
BPS QoQ
Including trainees 80.2 76.5 78.2 370 200 Utilisation (ex- trainees) improved
by 200BPS on QoQ basis, highest in
last 15 years
Excluding trainees 84.0 80.5 82.0 350 200
Source: Company, Sai Proficient Investment Advisory
Revenue by project type
Particulars Q1FY18 Q1FY17 Q4FY17 YoY (%) QoQ (%)
Fixed price 50.3 45.7 49.4 16.7 5.1 Fixed-price projects were up by 5.1%
QoQ vs 0.5% QoQ in Q4FY17in $ mn 1,333.5 1,143.0 1,269.1
Time and material 49.7 54.3 50.6 -3.0 1.4
in $ mn 1,317.5 1,358.0 1,299.9
Source: Company, Sai Proficient Investment Advisory
Sai Proficient Investment Advisory, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned
in the article.

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