Infosys Q1FY13: Another miss, expects further cut in estimates
- Results below expectation: Infosys’ revenue grew by 8.6% QoQ to Rs96.16bn for Q1FY13 (Guid.: Rs90.56bn, PLe: Rs96.11bn, Cons: Rs96.08bn) in Indian rupee term, whereas revenue in US$ term de-grew by 1.1% to US$1752m (@cc $1763m) (Guid.: $1,780m, PLe: $1,780m). The company reported an operating margin erosion of 190bps QoQ to 28% (PLe: 31.4%, Cons: 30.4%) despite currency tailwind of 9.8% QoQ. The company reported EPS of Rs40 (Guid: Rs36.89, PLe: Rs42.06, Cons: Rs42.43), a de-growth of 1.2% QoQ.
- Geography and segments – NA and Manufacturing stable, Europe and BFSI disappoints: Revenue for NA and Europe grew by 1.6% (@cc 1.7%) and -8.4% (@cc -7.2%) QoQ, respectively, whereas in terms of vertical, Maunfacturing and BFSI grew by 2.2% (@cc 3.1%) and -1.1% (@cc -0.4%) QoQ, respectively. Except Testing Services (5.3% QoQ) and IMS (5.3% QoQ), all service line declined.
- Pricing – pricing declined: The pricing declined by 3.7% QoQ (Onsite: -3.4%, Offshore: -3.8%). It added 51 new clients. Utilization excluding trainees further fell by 140bp to 71.6% due to weaker than expected growth.
Outlook - Lower than expectation of US$ revenue guidance, No guidance for Q2FY13: Infosys has revised their US$ revenue guidance downward by 3.7% due to cross currency movement and weaker demand. The new guidance in USD revenue growth is 5% for FY13 (PLe: 7-9%, Cons: 6-8%). Its rupee EPS guidance revised upward by 4% YoY to Rs166.5 (PLe: Rs164-168). The company has stopped giving quarterly guidance.
Stock Valuations and Recommendation- See pressure on stock in near terms:
Prabhudas Lilladher sees weakness in the stock price due to weak guidance in near term. They may revisit their estimates post conference call.
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Prabhudas Lilladher has a nationwide distribution network, consisting of branches, franchisees and associates, providing a comprehensive gamut of financial services in the Institutional and Retail domain. Their services includes Equity, derivatives; margin funding, mutual funds, PMS, IPOs and online trading.
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- Buy Infosys for a target of Rs4040
- Infosys: Accumulate between CMP and Rs3081
- Technical Stock Pick: Sell Infosys between CMP and Rs3260
- Infosys: Mr. Vishal Sikka appointed CEO, Mr. NRN to become Emertius; buy
- View on Infosys appointment of CEO/MD
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