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Infosys 1QFY2015 performance highlights and results update

July 14, 2014, Monday, 05:25 GMT | 00:25 EST | 08:55 IST | 11:25 SGT
Contributed by Angel Broking


For 1QFY2015, Infosys reported an operating margin and net profit ahead of our expectations while the top-line came in a tad below our expectation. The EBIT margin for the quarter came in at 25.1% V/s 25.5% in 4QFY2014, a dip of 34bp qoq. This is much higher than an expected 22.6%. The company has maintained its USD revenue growth guidance for FY2015 at 7-9%, which implies a 2.3-3.5% qoq growth for the rest of the qauters in FY2015. We maintain an Buy rating on the stock.

Quarterly highlights: For 1QFY2015, Infosys posted a 2.0% sequential growth in USD revenues to US$2,133mn V/s an expected US$2,151mn. In constant currency (CC) terms, the revenue grew by 1.5% qoq. In rupee terms, the revenue came in at Rs.12,770cr V/s an expected Rs.12,843cr, down 0.8% qoq. The EBIT margin came in at 25.1% V/s 25.5% in 4QFY2014, a dip of 34bp. This is much higher than an expected 22.6%. In USD terms, the net profit came in at US$482mn, a qoq dip of 1.0%. On a yoy basis, in USD terms, the company posted sales and net profit growth of 7.1% and 15.3% respectively, while in rupee terms the growth stood at 13.3% and 21.6% yoy, respectively.

Outlook and valuation: IT spending outlook for CY2014 bodes well for the FY2015E revenue outlook of the sector in general, and Infosys in specific. We believe Infosys will continue to lag behind its tier-I peers like TCS and HCL Tech on the revenue growth front. Over FY2014-16E, we expect USD and INR revenues to grow at a CAGR of 10.8% and 10.8%, respectively. We expect the EBIT margin to remain at 24.5% in FY2015 and 25.0% in FY2016. We value the stock at 18x FY2016E EPS of Rs.234, which gives us a target price of Rs.4,207, and maintain our Buy rating on the stock.