Apr 10, 2003|
Infosys: Meets guidance
Infosys has posted a 1% sequential growth in net profits for 4QFY03. This is line with the guidance given by the company but below market expectations. However, on the revenue front the company has beaten its own guidance and managed to meet market expectations with a 6% sequential growth.
|Operating Profit (EBDIT)
|Operating Profit Margin (%)
|Profit before Tax
|Profit after Tax/(Loss)
|Net profit margin (%)
|Diluted number of shares
|Diluted Earnings per share*
The topline growth for 4QFY03 was on the back of a strong 13% growth in volumes. This is an indication of the company’s resilience. The volume growth posted was highest in the last eight quarters. This is during a time when businesses are facing a tough environment due to a war in Iraq. While margins were lower compared to 3QFY03, the fall was marginal. The company added 28 new clients during the quarter.
|Price (Billing rates)
The company has given a EPS guidance of Rs 161 to 163 for FY04. This translates to a growth of 11%-12%. This is much below market expectations of an earnings guidance of 20% growth. The management seems to have adopted a conservative stance considering the fluid geo-political environments and the state of the US economy. The topline is expected to grow between 22% to 24% in FY04. The guidance therefore, indicates that the company expects the margin pressure to continue. However, it must be also noted that a conservative guidance gives Infosys a room for discretionary spending that is required to tap future growth prospects.
At the current market price of Rs 3,535 the stock is trading at a P/E multiple of 22x its FY04 earnings guidance. The selling seen is due to those taking a position for the short term exiting. However, we continue to be optimistic about the company’s future growth prospects. Therefore, investors who wish to invest for the long term could take advantage of the frenzied selling to enter the stock, which is available at attractive valuations.
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