Buy Infinite Computer; target Rs 206: SPA Research
SPA Research is bullish on Infinite Computer Solutions India and has recommended buy rating on the stock with a target price of Rs 206 in its November 20, 2012 research report.
November 28, 2012 / 16:34 IST
SPA Research is bullish on Infinite Computer Solutions India and has recommended buy rating on the stock with a target price of Rs 206 in its November 20, 2012 research report.
"Infinite reported better than expected Q2FY13 revenue growth of 7% to $63mn (SPAe: $61mn). The company saw greater traction in IMS business and added 6 new clients taking the total to 62. The operating margins at 16.65% were stable and above the company’s FY13 guidance of 16%. This strong Q2 performance has vindicated our confidence that the company will be able to beat its FY13 revenue guidance of $265mn.""Infinite’s Q2FY13 revenues of $63mn saw incremental revenue of $4.1mn QoQ. Of this $3.7mn of incremental revenues was contributed by IMS business due to higher offshore volume growth. Pricing both at onsite and offshore declined by 4.41% and 4.76% respectively. Europe seizes to contribute anything to the topline with last BOT project ending in Q4FY12 and nothing new in pipeline. Operating Margins of the company declined by 14bps to 16.65% sequentially on the back of (i) higher other expenses emanating out of SI costs undertaken for APDRP and UIDAI projects in India and (ii) lower blended pricing QoQ partially offset by (iii) higher gross margins – result of higher India based IMS business revenues. The hedging loss of INR 83mn led to lower PAT margins of 9% against 11% in Q1FY13.""The company added 6 new clients in Q2FY13. It signed 5 new service agreements in US across domains like BFSI, Telecom, Logistics etc. It won a number of deals in Q2 in Mobility, IP Leveraged solutions business and ADM which will start contributing in H2FY13. The company launched iTaaS (Text based cloud support) and a communication suite of products for carriers in IMS and Non-IMS Networks further strengthening its non-linear business which now contributes 18% to the topline. Non-ADM businesses now contribute >40% to the revenue. India (130%), IMS (214%), Energy-Utilities (694%) and Top-10 clients (8.7%) were major contributors to growth in Q2FY13.""The company continued with its FY13 revenue guidance of $265mn and operating margins at 16% taking the exchange rate at INR 52/$. We expect the company to surpass its FY13 revenue guidance and also to report better margins given the continued INR weakness. On the back of improved guidance and increased deal pipeline we remain confident that the company would be able to meet our expectations. We have estimated USD revenue CAGR of 23% and operating margins of 16.80%/17.58% in FY13E/14E on the back of Non-Linear business increasing contribution partially offset by INR appreciation, resulting in an EPS CAGR of 17.72% over FY12-14E. Thus, we continue to recommend BUY with an 18-month TP of INR 206 at 5.5x FY14E earnings," says SPA Research report.
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