Infosys Ltd (Q4 FY14)

India Infoline News Service | Mumbai |

Infosys Q4 FY14 operating performance and FY15 dollar revenue growth guidance were both ahead of our expectations.

CMP Rs3,260, Target Rs3,750, Upside 15.0%
  • Revenue growth was sluggish as expected; offshore shift continues

  • FY15 dollar revenue growth guidance encouraging at 7-9%

  • Growth remain inconsistent within verticals, geographies and services

  • Operating resilience to weak headline growth impresses again   

  • Revenue growth to converge with industry in FY16; margin to trend-up except for material strengthening of the rupee

  • Retain BUY with 9-12 month price target of Rs3,750

Result table
(Rs mn)
Q4 FY14
Q3 FY14
% qoq
Q4 FY13
% yoy
Net sales
128,750
130,260
(1.2)
104,540
23.2
Operating profit
36,410
36,200
0.6
27,700
31.4
OPM (%)
28.28
27.79
49 bps
26.50
178 bps
Depreciation
3,600
3,610
(0.3)
3,080
16.9
Other Income
8,510
7,310
16.4
6,740
26.3
PBT
41,320
39,900
3.6
31,360
31.8
Tax
11,400
11,150
2.2
7,420
53.6
Effective tax rate (%)
27.6
27.9
(36) bps
23.7
393 bps
Adjusted PAT
29,920
28,750
4.1
23,940
25.0
Adj. PAT margin (%)
23.2
22.1
117 bps
22.9
34 bps
Extra Ordinary items
-
-
-
-
-
Reported PAT
29,920
28,750
4.1
23,940
25.0
EPS (Rs)
52.4
50.3
4.1
41.9
25.0
Source: Company, India Infoline Research

Revenue growth was sluggish as expected; offshore shift continues As indicated in the recent interaction with investors, Infosys dollar revenues came in at the lower end of its implied Q4 FY14 guidance. Sequentially, revenues de-grew 0.4% qoq on the back of 0.8% qoq decline in blended pricing (offshore effort shift and 0.6% qoq dip in offshore pricing) while the billed efforts grew by 0.4% qoq (1.2% qoq offshore and -1.3% qoq onsite). The revenue mix continued to move towards offshore; 40bps qoq in Q4 FY14 and 240bps in the previous two quarters. Infosys won four large deals (spread across its mainstay verticals) during the quarter having combined TCV of more than US$700mn. As per the management, whereas the deal pipeline has marginally improved the sale cycles remain long.


FY15 dollar revenue growth guidance encouraging  

Notwithstanding the near-term revenue uncertainty caused by unanticipated project ramp downs and cancellations within few client accounts across verticals, Infosys guided for a fairly encouraging 7-9% (our expectation was 5.5-8%) dollar revenue growth in FY15. The guidance implies a healthy CQGR of 2.2-2.9% over the four quarters of the year which is materially better than 0.6% CQGR witnessed during H2 FY14. Infosys expects the client-specific issues to subside completely in early FY15 and then growth to revive strongly.


Growth trends remain inconsistent within verticals, geographies and services

Client-specific budget cuts/ramp downs impacted revenue growth in BFSI (-0.4% qoq), Manufacturing (0.5% qoq; weakness was prominent in Hi-Tech space), Retail & CPG (-3.5% qoq) and Healthcare & Life Sciences (-6% qoq) verticals. On the other side, Telecom (8.4% qoq) and Transportation (5.8% qoq) witnessed strong

BSE 1,003.45 [7.65] ([0.76]%)
NSE 1,003.75 [6.75] ([0.67]%)

***Note: This is a NSE Chart

 

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