CRISIL maintains fair value of Rs 139 to Infinite Computer

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CRISIL maintains fair value of Rs 139 to Infinite Computer

CRISIL Research has come out with its report on Infinite Computer Solutions (India). The research firm has maintained the fundamental grade of 3/5 to the company in its February 13, 2012 report.

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CRISIL Research has come out with its report on Infinite Computer Solutions (India) . The research firm has maintained the fundamental grade of 3/5 to the company in its February 13, 2012 report.

Infinite Computer Solutions (India) Ltd's (Infinite's) Q3FY12 revenues in US$ terms declined ~6% q-o-q, but were broadly in line with CRISIL Research's expectations. Revenues in Indian rupee terms were higher than expected on account of rupee depreciation. In Q3FY12, Infinite's revenues from the highmargin IP leveraged and testing business recorded strong growth. Additionally, lower growth in employee cost (due to q-o-q decline in headcount) and q-o-q decline in other operating cost resulted in strong growth in EBITDA margin, which was higher than we expected and the highest since FY09. Also, higherthan- expected foreign exchange gain resulted in PAT substantially exceeding expectations. We are likely to raise our revenue and earnings estimates for FY12 and FY13. We remain positive on Infinite's long-term growth prospects and maintain the fundamental grade of 3/5.

Q3FY12 result analysis
• Revenues in US$ terms declined by ~6% q-o-q (up 7.3% y-o-y) due to 14.7% q-o-q decline in revenue from the top client (33.2% of Q3FY12 revenues). Overall revenues in Indian rupee terms grew by 4.8% q-o-q (21.2% y-o-y) to Rs 2,694 mn aided by rupee depreciation. Revenues from the high-margin IP leveraged and testing business grew by 17.9% q-o-q and constituted 28.8% of overall revenues.

• The company continued to optimise it headcount as number of employees declined q-o-q for the third quarter, partly due to transfer of build operate and transfer contract, in the infrastructure management services segment, to the client. Also, utilisation remained high at 90% vs. 91% q-o-q (82% yo- y). Due to this, growth in the high-margin IP leveraged and testing business and rupee depreciation, EBITDA margin expanded by 315 bps q-oq (335 bps y-o-y) to 20%; highest since FY09.

• PAT margin also improved by 264 bps q-o-q (242 bps y-o-y) to 14.6% aided by forex gains of Rs 64 mn (Rs 35 mn q-o-q; loss of Rs 1 mn y-o-y). EPS was Rs 9.2 vs. Rs 7.2 in Q2FY12 and Rs 6.2 in Q3FY11.

• The company now has four clients (three q-o-q) contributing revenues in excess of US$ 20 mn p.a. and nine clients (eight q-o-q) contributing more than US$ 5 mn p.a. At the same time, clients contributing more than US$ 1 mn in revenues have declined to 14 from 15 in the last quarter. During Q3FY12, the company added five new clients.

Valuations: Current market price has strong upside
We continue to use the discounted cash flow method to value Infinite and maintain the fair value of Rs 139. We retain the valuation grade of 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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