The views of Ms.
Ankita Somani (Research Analyst -IT, Angel Broking) on Infosys 3 Quarter FY
2014 results:
“Infosys reported
3Q FY2014 results with operating margins ahead of Angel Broking's expectations,
but top-line came in below estimates. Dollar revenues grew by 1.6 % quarter on
quarter (q on q ) (estimate – 2%). Constant currency revenue growth was
1.2 % q on q led by merely 0.7 % q on q volume growth (largely offshore led).
Volume growth was
lower than expectations because onsite volumes declined by 3.4 % q on q mostly
due to offshore effort shift. Bended
pricing grew by 0.7 % q on q. Revenues from Europe grew by 5.5 % q on q while
declined by 0.8 % q on q from North America geography. In INR terms, revenues
came in at Rs. 13,026 cr, up 0.5 % q on q.
Infosys’ operating
margins have been a concern since last 6 quarters and during 3 Q FY 2014 the
company posted whopping 1.45% q on q growth in EBIT margin to 25%, led by
operational efficiency with inch up in utilization level to 74.1 % (73.7 % in
2Q FY 2014) and sequential decline in S & M spends. Net profit came in at
Rs. 2,875 cr, up 9.5 % q on q.
The company revised
its USD revenue growth guidance to 11.5% to 12% (expectation: 11-12%) from 9%
to 10% given earlier, implying 1.4 % q on q USD revenue growth in 4Q FY
2014 to meet the upper end of guidance
which seems attainable as currently Angel Broking were factoring Infosys to
clock about 2.2 % q on q USD revenue
growth in 4Q FY 2014.
The management
opined that the global economic environment has improved and looks exciting for
IT services industry. The company has still got headroom to increase its
utilization level by 3% to be comparable with peers and this, in turn, will
assist in increasing operating margins further.
The company added
one US $ 300mn+ client and signed 20 deals during the quarter. Angel Broking
believe that the impact of current high level exits could be felt in the medium
term.
However, a company
like Infosys is system driven with a healthy management bandwidth and hence the
impact will not be long lasting. The current set of results as well as guidance
given is largely inline with expectations and factored in the stock, which
limits a sharp the upside potential for the script in the immediate future. We
recommend Accumulate rating on the stock.”
Corporate
Communications
Ackruti Star, 6th
Floor,
MIDC, Andheri (E),
Mumbai – 400 093
Main : 022 -
39357 6000 (Ext-6956)
Website : www.angelbroking.com
angelresearch@angelbroking.in
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