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Friday, April 18, 2008

Infosys ignites the minds and markets


The medium to long term outlook for the tech sector may be weak. But Infosys managed to meet the street expectations as it posted a rupee revenue growth of 6.3% qoq in Q4 FY08. Volume growth was modest at 4.9% qoq while pricing improvement was negligible. Slow growth was witnessed in the US region along with a material de-growth in banking and financial services segment. EBITDA margin was stable qoq at 32.5% aided by SG&A leverage, better subsidiary profitability, rupee depreciation and absence of one-time expenditure. Q4 FY08 net profit growth of 4.1% qoq, excluding the tax reversals, was marginally below India Infoline expectations. Announcement of a special dividend of Rs20 and increase in payout policy was a positive surprise.

Terming the business environment as challenging and imposing revenue loss risk, management guides for a weak Q1 FY09. "Our Global Delivery Model, combined with our consulting and solution capabilities, provides a strong platform for customers seeking efficiencies in their IT spend," said S. Gopalakrishnan, CEO and Managing Director. "Thus, while there could be short-term challenges due to global economic uncertainties, we as a company see significant growth opportunities in the medium to long term."

FY09 guidance of 19-21% revenue growth and EPS of Rs92.3-93.9 is healthy. We believe that strong back-ended revenue growth expectation (Q2-Q4 FY09 CQGR 5.6-6.7%) and Re/$ assumption of Rs40 are key risks in the guidance