Moneycontrol Bureau
Investors gave thumbs up to Vishal Sikka’s first quarter as Infosys CEO, taking share price to record high of Rs 3,908.60 Friday, up 7.2 percent. The software services exporter reported better-than-expected earnings on every front in July-September quarter. Post results, JPMorgan maintains its overweight rating on the stock with a target price of Rs 3,900 while Deutsche Bank retains hold rating.
Infosys delivered 3.1 percent growth (Q-o-Q) in dollar revenues at Rs 2,201 million as against estimates of 2.9 percent growth, maintaining full year (FY15) dollar revenue growth guidance at 7-9 percent.
Rupee revenue rose by 4.5 percent sequentially to Rs 13,342 crore driven by volume growth and profit grew by 7.3 percent to Rs 3,096 crore in the quarter ended September 2014 as against forecast of Rs 13,307 crore and Rs 2,985 crore, respectively.
Volumes increased 3 percent Q-o-Q as offshore volumes increased 3.8 percent Q-o-Q while onsite volumes were up 1.1 percent. Realisations increased 0.6 percent Q-o-Q in constant-currency terms as onsite realisations were up 2.6 percent Q-o-Q.
Infosys also beat on margin front. Operating profit margin expanded by 96 basis points Q-o-Q to 26.1 percent partly driven by rupee depreciation as against expectations of 25.6 percent.
Sikka, who officially joined Infosys on June 12, expects operating margin to be around 25 percent in FY15.
Brokerage house JPMorgan believes it is appropriate to monitor the leading indicators of improvement than revenue recovery itself. In this context, it see the leading indicators of improvement at Infosys reflected in declining attrition, increased net hiring, sales & marketing investments, and improvement in client progression metrics.
Net addition of 4,126 employees is the highest in the last 10 quarters, quarterly annualised attrition moderated Q-o-Q slightly from 26.5 percent to 25.1 percent.
According to the brokerage, growth is more diversified and not lop-sided. Both bread-and-butter services and consulting, package implementation report healthy growth. Application development, application maintenance and inframanagement within the bread-and-butter segments did well growing 5.1 percent, 4.3 percent and 3.2 percent Q-o-Q respectively, while consulting & system integration revenues also increased 3.5 percent Q-o-Q," it explained.
Infosys is currently trading at just 6-7 percent premium to MSCI India, which JPMorgan believes is still attractive.
Meanwhile, Deutsche Bank says while results are directionally positive, the company still continues to lag peers on revenue growth and attrition at 20 percent remains higher than peers.
The software services exporter declared a bonus issue in the ratio of 1:1 and the same will be applicable to ADR shareholders as well. It also announced interim dividend of Rs 30 per share, higher than estimates of Rs 25 per share.
At 11:30 hours IST, the stock was quoting at Rs 3,860, up Rs 214.45, or 5.88 percent on the BSE.
Posted by Sunil Shankar Matkar
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
