X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Infosys: Concrete steps - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jul 9, 2002

    Infosys: Concrete steps

    As Infosys declares its results tomorrow, markets will be eagerly looking for anything that could suggest initial signs of a recovery in the company’s business environment. The technology sector in India is going through a rough patch due to a slowdown in the US economy. The US with a lion’s share of 62% of the total exports from India is the most dominant geography for most of the software companies.

    Recent reports from various quarters indicate increasing client visits and software companies strengthening employee intake. Thus, expectations are that there might be some evidence of an improvement in the business environment in the company’s numbers.

    (Rs m) 4QFY02 1QFY03E Change
    Sales 6,801 6,840 0.6%
    Other Income 233 154 -34.0%
    Expenditure 4,094 4,125 0.7%
    Operating Profit (EBDIT) 2,707 2,715 0.3%
    Operating Profit Margin (%) 39.8% 39.7%  
    Interest - -  
    Depreciation 448 431 -3.9%
    Profit before Tax 2,493 2,438 -2.2%
    Tax 389 390 0.2%
    Provision and contingencies - -  
    Profit after Tax/(Loss) 2,103 2,048 -2.6%
    Net profit margin (%) 30.9% 29.9%  
    Diluted number of shares 66.1 66.1  
    Diluted Earnings per share* 127.3 124.0  
    P/E (x)   27.6  
    *(annualised)      

    As far as the company’s outlook is concerned, it expects the IT budgets globally to decline by 5% to 8% during the year. Consequently, it has indicated a 22% growth in topline and 18% growth in bottomline for FY03. The revenues for first quarter of FY03 (1QFY03) are expected to grow by about 0.6% on QoQ basis (12% on a YoY basis). The net profits in 1QFY02 expected to show a marginal decline of 2.6% QoQ but grow by 8% on a YoY basis. The decline net profits are on account of an increase in staff costs as the company’s annual salary hike comes into effect during the first quarter. This implies that the company will have to achieve a 25% growth in topline and a 20% growth in profits in remaining nine months to meet its guidance.

    Particulars FY02 FY03E
      1Q 2Q 3Q 4Q FY02 1QE
    OPM (excl. Other Inc.) 39.3% 39.8% 40.5% 39.8% 40.1% 39.7%
    Tax / PBT 13.0% 14.1% 14.5% 15.3% 15.6% 16.0%
    NPM 31.0% 29.8% 31.2% 31.1% 30.9% 29.9%
    Cash FDEPS (Rs) 34.0 34.9 37.4 38.6 146.5 37.5
    FDEPS (Rs) 29.5 28.9 31.2 31.8 122.2 31.0

    During 1QFY03, the company took a number of steps towards boosting topline growth. Among them is the launch of its business process management (BPM) subsidiary and acquisition of Trade IQ in the banking group, were the most prominent.

    Infosys announced the formation of Progeon, its BPM venture in April. Citigroup Investments has invested US$ 20 m (Rs 980 m) in Progeon for a stake, which is estimated to be 20% according to industry sources. Progeon also bagged its first contract during the quarter from GreenPoint Mortgage, US. The company’s banking group acquired Trade IQ, product division of IQ Financial Systems Inc that is based in the US. Acquisition was made to strengthen the company’s banking group and the group will now be able offer a product for the wholesale and investment banking segment. The size of the acquisition was estimated to be US$ 3.9 m (Rs 191 m) by almost all leading financial newspapers.

    The company took several steps to boost organic growth also, which included acquisition of AUOTLAY, a software product and a tie up with Concours Group, a strategy-consulting firm. AUTOLAY is a 3-D software used in design development of components made from composite materials. With the increasing use of composite materials increasing in the aerospace and auto industries, Infosys hopes to cater to the resultant increase in demand. The company hopes to strengthen its presence in the consulting domain from the tie up with Concours Group. The two companies combined plan to provide consulting services and help companies leverage on technology.

    Thus, the company has taken concrete steps to ensure future growth during the quarter. While near term prospects continue to be uncertain, the company took concrete steps during the quarter, to ensure future growth. However, even brilliant performers like Infosys have their own set of problems. The company has a problem of plenty (Read more), which it needs to address. At the current market price of Rs 3,427 the stock trades at a P/E multiple of 24x its FY03 estimated earnings.

     

     

    Equitymaster requests your view! Post a comment on "Infosys: Concrete steps". Click here!

      
     

    More Views on News

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    Infosys: A Flat End to FY17 (Quarterly Results Update - Detailed)

    Apr 13, 2017

    Infosys ends FY17 with a 7% QoQ fall in net profit for the March quarter.

    Infosys: A Decent Quarter (Quarterly Results Update - Detailed)

    Jan 13, 2017

    Infosys has reported a 0.2% QoQ decrease in the topline and an increase of 4.6% QoQ in the bottomline for the quarter ended December 2016.

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    INFOSYS LTD SHARE PRICE


    Aug 17, 2017 03:37 PM

    TRACK INFOSYS LTD

    • Track your investment in INFOSYS LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    INFOSYS LTD - IBM COMPARISON

    Compare Company With Charts

    COMPARE INFOSYS LTD WITH

    MARKET STATS