[T.S.R:17509] Infosys-Sell

Infosys's 4QFY11 revenue stood at US$1,602m (up 1.1% qoq; 2% in constant currency terms). Volume growth in IT Services was down 1.4% qoq, while pricing increased 250bps (up 210bps in constant currency). Margin was down 120qoq due to higher SG&A costs. Revenue from the US and BFSI verticals was down 0.5% and 0.7% respectively (in constant currency). 

FY12 EPS guidance – A big miss. Infosys' FY12e EPS guidance was below street expectations, at  Rs 126.1-128.2 and accounts for a 250bps drop in operating margin due to currency movement, lower utilization and wage hikes. For 1QFY12e, management has guided for 2.6-3.6% qoq increase in revenue. 

Management change. Mohandas Pai has resigned from the Board, effective Jun '11 and has stated that this is not on account of opinion differences in the company's succession planning.

Change in estimates and risks. We lower our FY12e/FY13e EPS by 7%/8.6% to Rs136.4/ Rs157.2, mainly due to lower volume growth and margins. The stock should trade at Rs 2000 over the next six months.

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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